Lahdekorpi OY, a Finnish corporation, owns 100% of Three-O Company, a subsidiary incorporated in the U.S.

Required:

Given the limited information provided, determine the best transfer pricing method and the appropriate transfer price in each of the following situations:

1. 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, when then sells them to retail customers in the U.S.
2. Three-O Company manufactures mens 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 mens clothing normally earn a gross profit of 40% on sales price.
3. Lahdekorpi manufactures wooden puzzles at a cost of $2 each and sells them to Three-O Company for distribution in the U.S. Other Finnish puzzle manufacturers sells their product to unrelated customers and normally earn a gross profit equal to 50% of the production cost.