Byproduct, disposal costs, ethics. Enrique Chemicals, Inc., is a multinational company.

One of its subsidiaries is located in a small East European country. The country has only a few environmental protection laws, and even those are not enforced so as “to encourage rapid industrialization.”The subsidiary’s three major products emerge at splitoff point from a com¬

mon input. The joint costs are allocated to each product using the sales values at splitoff method. In addition to the three joint products, another product that emerges at splitoffpoint is a hazardous material. The hazardous material can be dumped into the Gulf at zero cost to the company. Alternatively, it can be processed further and sold as a cleaning liquid.

The cost accountant responsible for joint-cost allocation presented the following com¬

parative analysis to you, the controller:

Alternatives Dump Process into the Gulf Further Revenue $0 $ 600,000 Costs:

Further processing 0 360,000 Allocated joint costs 0 300,000 Marketing and distribution 0 60,000 Total costs 0 720,000 Net realizable value $0 $(120,000)

Required 1. Comment on the comparative analysis prepared by the cost accountant purely from a financial perspective. Show any supporting computations.

2. Assume, regardless of your conclusion in requirement 1, that adopting the process-further alternative would lead to a decrease in the company’s operating income. Disposal of the hazardous waste in a manner different than dumping it into the Gulf would also be costly.

Discuss the legal and ethical implications of dumping the hazardous material into the Gulf.

COLLABORATIVE LEARNING PROBLEM