Business, 29.01.2021 16:20 jakepeavy70

Lahdekorpi OY, a Finnish corporation, owns 100 percent of Three-O Company, a subsidiary incorporated in the United States. Required:

Given the limited information provided, determine the best transfer pricing method and the appropriate transfer price in each of the following situations:

a. Lahdekorpi manufactures tablecloths at a cost of $20 each and sells them to unrelated distributors in Canada for $30 each. Lahdekorpi sells the same tablecloths to Three-O Company, which then sells them to retail customers in the United States.

b. Three-O Company manufactures men’s flannel shirts at a cost of $10 each and sells them to Lahdekorpi, which sells the shirts in Finland at a retail price of $30 each. Lahdekorpi adds no significant value to the shirts. Finnish retailers of men’s clothing normally earn a gross profit of 40 percent on sales price.

c. Lahdekorpi manufacturers wooden puzzles at a cost of $2 each and sells them to Three-O Company for distribution in the United States. Other Finnish puzzle manufacturers sell their product to unrelated customers and normally earn a gross profit equal to 50 percent of the production cost.

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Lahdekorpi OY, a Finnish corporation, owns 100 percent of Three-O Company, a subsidiary incorporate...

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