The CFO Ltd. manufactures superior motherboards that are used in a variety of computers. The Motherboard Division (M Division) sells its motherboards both internally and externally. It is operating at 80% of its 250,000 unit capacity and internal sales account for approximately 20% of its current sales volume. Internally the motherboards are transferred into the Computer Division (C Division) at a transfer price of $11,250 each. Variable production costs are the same for internal and external sales.

The income statement for the M Division is presented below: