Bug-Off is a start-up biotechnology firm specializing in non-toxic pesticides for organic farming. Scientists at one of Bug-Off's subsidiaries, Beetle Rid, recently developed a new pesticide, N44, to rid crops of a particularly nasty genus of blue hair beetles, which destroy apple trees. In addition to producing this new pesticide, Beetle Rid produces another pesticide, O77, for external sale.

Per kilogram (kg) data on the selling price, variable costs, machine hours necessary for production are given below. Note that there are no fixed manufacturing or selling costs.

	N44	O77
Selling price	24.00	12.00
Variable Manufacturing Cost	5.00	4.00
Variable Selling Cost	3.50	2.00
Machine Hours	2.0	0.5
External Monthly Market Demand (in kgs)	5,000	10,000

Interpret the data on External Monthly Market Demand as follows: Beetle Rid can sell up to 5,000 kgs of N44 and 10,000 kgs of O77 at their respective market pricesbut cannot sell even one kilogram over these amounts, even at a lower price. If Beetle Rid chooses to sell fewer kilograms (of either product), it cannot charge a higher price.

Beetle Rid has 16,500 machine hours of capacity available every month.

Another division of Bug-Off, Lawn Love has an opportunity to process N44 further into a consumer product that would protect lawns from the Blue Hair beetle. Lawn Love would incur additional variable manufacturing costs of 6 per kilogram in reducing the potency of the pesticide and packaging it for home use. An outside distributor has offered Lawn Love 28/kg for up to 7,000 kgs of the modified N44 per month as long as it provided in 1,000 kg increments.

Beetle Rid does not incur any variable selling costs for internal transfers.

All divisions are only evaluated as profit centers.

1. For Q1 and Q2, assume that Bug-Off has chosen to set the transfer price for N44 to 22/kg. That is, the Lawn Love division will be charged 22 per kilogram for each kilogram of N44 that it wants transferred, regardless of how many kilograms it wants. Under this transfer pricing policy, how many kilograms of N44 will Lawn Love want transferred from the Beetle Rid division each month?
2. At the level of transfers you determined in Q1 what are Bug-Off's profits each month?