Question

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?


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  • CreatedDecember 15, 2014
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