Allied Manufacturing, Inc., has a division in the United States that produces locks and door knobs. The lever-style locking handle for exterior doors is transferred to a Manufacturing Division in Italy. The handles can be (and are) sold externally in the United States for $10 each. It costs $0.75 per handle for shipping and $1.50 per handle for import duties. When the handles are sold externally. Allied Manufacturing spends $1 per handle for commissions and an average of $0.20 per handle for advertising.

Required:
1. Which Section 482 method should be used to calculate the allowable transfer price?
2. Using the appropriate Section 482 method, calculate the transfer price.