In keeping with Internal Revenue Code, Clarence Company transfers goods to Marguerite Corporation, its foreign subsidiary, at the price Marguerite will sell the product to its customers, less the industry's average gross profit margin of 30%. What method of transfer pricing is Clarence using?

Question

Quizplus · Accepted Answer

The method used by Clarence Company is Resale price method as they are transferring the goods to Marguerite Corporation at the price Marguerite will sell the product to its customers, less the industry's average gross profit margin of 30%. In this method, the price of goods transferred is based on the resale value of those goods in the foreign market. The selling subsidiary's profit margin is also taken into consideration while pricing the goods.

In Keeping with Internal Revenue Code, Clarence Company Transfers Goods