Lahdekorpi OY$,$ a Finnish corporation, owns $100$ percent of Three$-$O Company, a subsidiary incorporated i

the United States.

Required:

Given the limited information provided, determine the best transfer pricing method and the appropriate

transfer price in each of the following situations:

a$.$ Lahdekorpi manufactures tablecloths at a cost of $$20$ each and sells them to unrelated distributors in

Canada for $$30$ each. Lahdekorpi sells the same tablecloths to Three$-$O Company, which then sells them

retail customers in the United States.

b$.$ Three$-$O Company manufactures men's flannel shirts at a cost of $$10$ each and sells them to Lahdekorpi,

which sells the shirts in Finland at a retail price of $$30$ each. Lahdekorpi adds no significant value to the

shirts. Finnish retailers of men's clothing normally earn a gross profit equal to $40$ percent of sales price.

c$.$ Lahdekorpi manufacturers wooden puzzles at a cost of $$2$ each and sells them to Three$-$O Company for

distribution in the United States. Other Finnish puzzle manufacturers sell their product to unrelated

customers and normally earn a gross profit equal to $50$ percent of the production cost.