Diamond Company manufactures riding lawn mowers at plants in Arkansas, Delaware, and Wyoming. It also has distribution centers in Brussels, Belgium, and Montreal, Quebec in Canada. The market price of the Model 413 riding mower is $350. The unit costs are as follows.

Diamond has set a transfer price of $350 to both the Canadian and Belgian divisions.
Required:
1. Calculate the transfer price under the comparable uncontrolled price method for both the Canadian and Belgian transfers.
2. Will the IRS be concerned about the transfer price actually set by Diamond?

Transcribed Image Text:

Variable product costs Fixed factory overhead $125 60 Landing costs (Canada) 20 Landing costs (Belgium) Avoidable marketing costs 25 45