Max Ltd. produces kitchen tools, and operates several divisions as investment centers. Division M produces a product that it sells to other companies for $16 per unit. It is currently operating at its full capacity of 45,000 units per year. Variable manufacturing cost is $9 per unit, and variable marketing cost is $3 per unit. The company wishes to create a new division, Division N, to produce an innovative new tool that requires the use of Division B's product (or one very similar). Division N will produce 30,000 units. Currently, Division N can purchase a product equivalent to Division M's from Company X for $15 per unit. However, Max Ltd. is considering transferring the necessary product from Division M.

1) Assume the transfer price is $12 per unit. How would this affect the purchasing costs of Division B.

3)How would this affect Max Ltd as a whole? Affect on Division A? B? on Max Ltd?