Florek Inc. allocates joint costs by using the net-realizable-value method. In the company's Chicago plant, products 1 and 2 emerge from a joint process that costs $310,000. Product 2 is then processed at a cost of $320,000 into products 3 and 4. Data pertaining to 1, 3, and 4 follow.
$\begin{array} { l l l l }
& \underline { 1 } & \underline { 3 } & \underline { 4 } \
\text { Costs beyond split-off } & \$ 30,000 & \$ 12,000 & \$ 18,000 \
\text { Selling price } & 30 & 34 & 60 \
\text { Pounds produced } & 10,000 & 2,000 & 3,000
\end{array}$ Required:
A. Allocate the $320,000 processing cost between products 3 and 4. Round to the nearest whole dollar.
B. From a profitability perspective, should product 2 be processed into products 3 and 4? Show your calculations.
C. Assume that the net realizable value associated with 2 is zero. How would you allocate the joint cost of $25310,000?

Question

Florek Inc. allocates joint costs by using the net-realizable-value method. In the company's Chicago plant, products 1 and 2 emerge from a joint process that costs $310,000. Product 2 is then processed at a cost of $320,000 into products 3 and 4. Data pertaining to 1, 3, and 4 follow.
 $\begin{array} { l l l l } 
& \underline { 1 } & \underline { 3 } & \underline { 4 } \
\text { Costs beyond split-off } & \$ 30,000 & \$ 12,000 & \$ 18,000 \
\text { Selling price } & 30 & 34 & 60 \
\text { Pounds produced } & 10,000 & 2,000 & 3,000
\end{array}$ Required:
A. Allocate the $320,000 processing cost between products 3 and 4. Round to the nearest whole dollar.
B. From a profitability perspective, should product 2 be processed into products 3 and 4? Show your calculations.
C. Assume that the net realizable value associated with 2 is zero. How would you allocate the joint cost of $25310,000?

Quizplus · Accepted Answer

The Answer of Florek Inc. allocates joint costs by using the net-realizable-value method. In the company's Chicago plant, products 1 and 2 emerge from a joint process that costs $310,000. Product 2 is then processed at a cost of $320,000 into products 3 and 4. Data pertaining to 1, 3, and 4 follow.
 $\begin{array} { l l l l } 
& \underline { 1 } & \underline { 3 } & \underline { 4 } \
\text { Costs beyond split-off } & \$ 30,000 & \$ 12,000 & \$ 18,000 \
\text { Selling price } & 30 & 34 & 60 \
\text { Pounds produced } & 10,000 & 2,000 & 3,000
\end{array}$ Required:
A. Allocate the $320,000 processing cost between products 3 and 4. Round to the nearest whole dollar.
B. From a profitability perspective, should product 2 be processed into products 3 and 4? Show your calculations.
C. Assume that the net realizable value associated with 2 is zero. How would you allocate the joint cost of $25310,000?

Florek Inc Required: A

Florek Inc Required:
A