Superior Brakes Corporation manufactures truck brakes at its plant in Mansfield, Ohio, at a cost of $10 per unit. Superior sells its brakes directly to U.S. truck makers at a price of $15 per unit. It also sells its brakes to a wholly owned sales subsidiary in Brazil that, in turn, sells the brakes to Brazilian truck makers at a price of $16 per unit. Transportation cost from Ohio to Brazil is $0.20 per unit. Superior's sole competitor in Brazil is Bomfreio SA, which manufactures truck brakes at a cost of $12 per unit and sells them directly to truck makers at a price of $16 per unit. There are no substantive differences between the brakes manufactured by Superior and Bomfreio.
Required:
Given the information provided, discuss the issues related to using (a) the comparable uncontrolled price method, (b) the resale price method, and (c) the cost-plus method to determine an acceptable transfer price for the sale of truck brakes from Superior Brakes Corporation to its Brazilian subsidiary.