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2 [10 MARKS] a) State the types of intercompany transactions for which a transfer price must be determined. (3 Marks) b) Goodlife Company manufactures food
2 [10 MARKS] a) State the types of intercompany transactions for which a transfer price must be determined. (3 Marks) b) Goodlife Company manufactures food blenders in the United Kingdom at a production cost of 80 per unit and sells them to uncontrolled distributors in the United Kingdom and a wholly-owned sales subsidiary in Canada. Goodlife's UK's distributors sell the blenders tow restaurants at a price of 200, and its Canadian subsidiary sells the blenders at a price or E250. Other distributors of blenders to restaurants in Canada normally earn a gross prof equal to 30 percent of selling price. Goodlife's main competitor in the United Kingdom se food blenders at an average 30 percent markup on cost. Goodlife's Canadian sam subsidiary incurs operating costs, other than cost of goods sold, that average 160 blender sold. The average operating profit margin earned by Canadian distributors of blenders is 10 percent. REQUIRED: Determine the transfer price (arm-length's price) between Goodlife Company Canadian Subsidiary using the following method: 1) Cost plus method 2) Resale price method 3) Comparable profit method
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