• The Machine Tools Company (MTC) operates two divisions. The manufacturing division (Division M) is responsible for the manufacturing of Component X. The assembly division (Division A) uses component X to manufacture a tool called “Tool-it” that is used in the construction industries. The following information has been extracted for both divisions: N$ Division M Division A N$ Selling price Variable cost - Component X 900 2 250 Additional variable cost (330) (330) Variable selling and administration expenses - (1 275) Contribution per unit 450 420 (120) (225) Capacity (units) 10 000 8 000 Division M is able to sell Component X to the external market. The external market can buy up to 5 000 components. The demand for the Tool-it is limited to 10 000 units. The variable selling and administration expense is not incurred on units transferred to Division A. Marks Required Sub total Total 2.1 Advise on the number of components to be transferred and derive an appropriate transfer price that works in the best interest of both divisions and MTC as a whole.