Babcock company manufactures fast-baking ovens in the united states at a production cost of $500 per unit and sells them to uncontrolled distributors in the united states a wholly owned sales subsidiary in canada. babcock’s u. s. distributors sell the ovens to restaurants at a price of $1,000, and its canadian subsidiary sells the oven at a price of $1,100. other distributors of ovens to restaurants in canada normally earn a gross profit equal to 25 percent of selling price. babcock’s main competitor in the united states sells fast-baking ovens at an average 50 percent markup on cost. babcock’s canadian sales subsidiary incurs operating costs, other than cost of goods sold, that average $250 per oven sold. the average operating profit margin earned by canadian distributors of fast-baking ovens is 5 percent.
which of the following would be an acceptable transfer price under the resale price method?
(a) $700
(b) $750
(c) $795
(d) $825