FACTS:

WIS-sub is a wholly owned Canadian subsidiary of Parent-Co a US corporation.WIS-SuB annually resells to industrial manufacturing companies approximately 30,000 industrial ovens purchased from Parent-Co, that are neither branded nor warranted.

The operating margin WIS-sub earned on its intercompany resales was 1.5%.

Parent-Co also sells 5,000 industrial ovens to an independent third party reseller in Canada for $100,000 each.Unlike the industrial ovens sold to WIS-sub, the industrial ovens sold in Canada to the third party reseller are warranted and bear the valuable Parent-Co label.

QUESTIONS

Suppose that the comparable profits methodology is the best method.Further assume that your search for comparable companies preliminarily includes those on the list below with all return on sales figures being a proper average of the last three taxable years.

Please list the companies below that are functionally comparable to CAN-CO and give a brief reason for your choice.

(a)Beta Co.- a distributor of video recording devices. Return on Sales: (2.5%).

(b)Cash Cow- a distributor of foundry equipment that is used throughout the United States. Return on Sales:5%.

(c)Cleaver Co.- a distributor of heavy sheet metal processing equipment. Return on Sales:8%.

(d)Canine Co.- a manufacturer of electronic dog leashes. Return on Sales: (5%).

(e)Floss Co.- a distributor of high-quality dental floss. Floss Co. has a contractor use Floss Co.'s proprietary manufacturing process to manufacture all the products Floss Co. distributes. The contractor affixes the Floss Co. tradename to all the products it manufactures. Floss Co. retains the right to all intellectual property.Return on Sales:3%.

(f)Freight Forward, Inc.- a provider of freight forwarding services to distribution companies trying to sell products in North America.Return on Sales:20%.

(g)Jet Electro- a manufacturer of high-tech gadgets.Return on Sales:7%.

(h)JuiceCo- a distributor and manufacturer of juicers.Return on Sales:12%.

(i)Acme- a distributor of heavy manufacturing-oriented equipment. Return on Sales:5.5%.

(j)Mountain Top, Inc.- a distributor of heavy machinery that makes mountain clearing equipment.Return on Sales:10%.

(k)Oven Co.- a distributor of toy ovens for children.Return on Sales:4%.

(l)Palm Co.- a distributor of digital games.Return on Sales:2.5%.

(m)Sonar Co.- a distributor of sonar tracking devices used by fishermen. Return on Sales:10%

(n)UnderWater Co.- a distributor of heavy equipment used to create man-made lakes.Return on Sales:3.5%.