Two genetically engineered enzymes are produced simultaneously from a series of chemical and biological processes: Q enzyme and Y enzyme. The cost per batch of Q and Y enzymes is $200,000, resulting in 300 grams of Q and 200 grams of Y. before Q and Y can be sold, they must be processed further at costs of $100 and $150 per gram, respectfully. Each batch requires one month of processing time and only one batch per month is produced.

Two genetically engineered enzymes are produced simultaneously from a series of chemical and biological processes: Q enzyme and Y enzyme. The cost per batch of Q and Y enzymes is $200,000, resulting in 300 grams of Q and 200 grams of Y. before Q and Y can be sold, they must be processed further at costs of $100 and $150 per gram, respectfully. Each batch requires one month of processing time and only one batch per month is produced. The monthly demand for Q and Y depends on the price charged. The following table summarizes the various price quantity combinations. Quantity Sold 50 100 150 200 250 300 Price per Gram of Q $1,200 1,100 1,000 900 800 700 Price per gram of Y $750 550 350 150 n.a n.a In the following analysis, the optimum price of Q is $900 per gram and the optimum price of Y is $750 per gram. Quantity Price Revenue Total Total Sold per Q of Q cost of Q* profit 50 $1,200 $60,000 $25,000 $35,000 100 1,100 110,000 50,000 60,000 150 1,000 150,000 75,000 75,000 200 900 180,000 100,000 80,000 250 800 200,00 125,000 75,000 300 700 210,000 150,000 60,000 *cost per gram of Q + ($200,000/500)+$100+$500/gram. ^cost per gram of Y= ($200,000/500)+$150+$550/gram. Price per Y $750 550 350 150 n.a n.a. Revenue from Y $37,500 55,000 52,500 30,000 Total cost of Y^ $27,000 55,000 82,500 110,000 Total profit $10,000 0 (30,000) (80,000) A. Critically evaluate the analysis underlying the pricing decisions of $900 for Q and $750 for Y. B. What should management do if the cost per batch rises to $225,000