A company has two divisions, Division A and Division B. Division A makes and sells K7 motors, which can either be sold to outside customers or to the Division B. Next month, the following results are expected to occur at Division A:

Selling price per K7 motor to outside customers= $115

Unit variable production cost =$75

Monthly capacity of K7 motors = 3500 units

Sales of K7 motors to outside customers = 2100 units

Division B would like to buy 1,200 of these motors from Division A next month. Division A can purchase these motors from an outside supplier at $110 each.

1. If Division A sells 1,200 of the motors to Division B next month at a price of $110 per motor, what would be the monthly effect on profits of the company as a whole?

2. Assume sales of K7 motors to outside customers are expected to be 2,840 units next month wile all other conditions remain the same. If Division A sells 1,200 motors to Division B next month at a price of $110 per motor, what would be the monthly effect on profits of the company as a whole?