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, respectively. 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 summa-rizes the various price- quantity combinations.

In the following analysis, the optimum price of Q is $ 900 per gram and the optimum price of Y is $ 750 per gram.

Required:
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?

Transcribed Image Text:

Price per Gram of Q $1,200 1.100 1,000 Quantity Sold Price per Gram of Y $750 550 350 150 n.a. n.a 6 100 250 300 800 700 Quatity Pri Total Proft Total Cost Price Revenue Total cost Total per rmofY Profit $750 $37.500 27.500 $10,000 5.000 55,000 cepr Revenue of Q of Q 60,000 110,000 150,000 180,000 200,000 210.000 25,000 35.000 50,000 75,000 100,000 $1.200 100 150 550 350 52.500 82.500 30,000) 150 n.a. n.a. 1,100 1,000 60.000 75,000 80,000 30,000 0,000 (80,000) 125,000 150,000 60,000