In exhibit 1, it portrays a value chain concept of TFC, Allied operates its forms manufacturing and TFC activities as a separate profit centre. The transfer price of product to TFC was at arm’s length with the transfer price set at fair market value. Allied manufactures business forms in 13 locations. Although the TFC sales people had the option to outsource products if necessary, internal sourcing was more encouraged for customer orders. Clients who participated in the forms management program kept an inventory of forms at one of Allied’s 10 distribution centers. The forms were distributed to the client as required. Usage of distribution center by clients incur extra charges to cover the cost of warehousing and distribution based on a percentage of the cost of sales of the products for that month, regardless of the specific level of service provided to that clients.