Answer to Question #91755 in Other for lydia momanyi

Question #91755
Hoover Ltd sells its vacuums to its overseas related distributor, Dustbuster Ltd and a local unrelated distributor Suck Ltd. Information available about the transactions of Dustbuster Ltd and Suck Ltd are as summarised below;

Dustbuster Suck Ltd
Price paid 15,000 13,500
Delivery terms CIF FOB
Quantity 95 100
Freight cost 0 1,500
Insurance 0 500
Credit period 60 days Upon dispatch
Interest rate on
working capital 10% 0

i) Which transfer pricing method is most appropriate (2 marks)
ii) Calculate the Arm’s Length price. (8 marks)
Expert's answer
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