Basic transfer pricing: manufacturer Motor Mobile Enterprises (MME) designs, manufactures and sells speciality motion control components for use in specific medical robotic equipment. MME has two manufacturing divisions: motor division medical applications division. The motor division produces electric motors, 20 per cent of which are sold to the medical applications division of MME. The remainder are sold to outside customers. MME treats both divisions as investment centres and allows division managers to choose their sources of sale and supply. Corporate policy requires that all interdivisional sales and purchases be made at a transfer price based on standard variable cost. The motor division's estimated sales and standard cost data for the year ending 31 December, based on capacity of 100 000 units, are as follows: Sales Variable costs Fixed costs Gross margin Unit sales To the medical applications division s 500 ooo (450 (200 000) S(150000) 20 To outside customers S4000000 (1 800 (600 000) 80 The motor division has an opportunity to sell the 20 000 units that it currently sells to the medical applications division to a new outside customer at a price of $40 per unit. The medical applications division can purchase its requirements from an outside supplier at a price of $45 per unit. Required: 1. Assuming that the motor division wishes to maximise its profits, should the motor division take on the new customer and drop its sales to the medical applications division? Explain your answer.