Lahdekorpi OY a The best transfer pricing method in this case is the comparable

Lahdekorpi oy a the best transfer pricing method in

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13. Lahdekorpi OY a.The best transfer pricing method in this case is the comparable uncontrolled price method. The appropriate transfer price is $30 per tablecloth, the price at which Lahdekorpi sells the same product to unrelated distributors in Canada. Although a sale to a distributor in Canada and a sale to a distributor in the United States are not exactly the same, they should be comparable enough to allow the use of this method.b.The best transfer pricing method in this scenario is the resale price method. Lahdekorpi adds no value to the shirts it purchases from Three-O Company before selling them in the Finnish market. A reasonable gross profit to be earned by Lahdekorpi on sales of shirts can be determined by referring to the gross profit normally earned by Finnish retailers of men’s clothing. The appropriate transfer price is $15 [$25 – ($25 x 40%)].c.The best transfer pricing method in this case is the cost plus method. An acceptable transfer price is $3 [$2 + ($2 x 50%)]. Both the cost to produce each puzzle and the gross profit earned by similar companies producing similar products can be reliably determined.14. Superior BrakesSuperior Brakes sells directly to truck manufacturers in the United States, and to its 100%-owned sales subsidiary in Brazil. The Brazilian sales subsidiary sells directly to Brazilian truck makers. Superior Brakes does not sell to unaffiliated distributors in Brazil so there is no comparable uncontrolled transaction from which a comparable uncontrolled pricecan be determined. If Superior Brakes were to sell to unaffiliated truck brake distributors in Brazil, the price charged could be considered a reliable arm’s length price under the comparable uncontrolled price method if there are no substantive differences in the terms of the sales. The resale price method typically is used when the buyer/reseller is merely a distributor of finished goods and does not add a substantial amount of value to the product. This is true for Superior’s Brazilian sales subsidiary. To use the resale price method, the final selling price to uncontrolled parties must be known and an appropriate gross profit for the reseller must be determinable. Information on an appropriate gross profit markup for distributors of truck brakes is not provided. The facts of the problem indicate that other than sales in Brazil, Superior Brakes does not use a distributor but instead sells directly to truck manufacturers. The only competitor for which information is provided, Bomfreio, also does not use a distributor for sales of its truck brakes.Application of the cost plus methodrequires knowledge of the cost of the product and an appropriate gross profit markup for sales to distributors made by other truck brake manufacturers. There is no information provided about gross profit markups on sales made by other truck brake manufacturers to distributors, so an appropriate gross profit markup is unknown.

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