North Division Sells Cloth Internally to South Division

Multiple Choice

North Division sells cloth internally to South Division. South Division uses the cloth to produce inexpensive curtains sold at discount stores. North Division incurs costs of $1.50 per pound, while South Division incurs additional costs of $4.80 per pound. The product is sold to external customers for $8.00 per set of curtains. Identify which of the following formulas correctly reflects the company's operating income.

A) $8.00 - $1.50 = $6.50
B) $8.00 - $4.80 = $3.20
C) $8.00 - ($1.50 + $4.80) = $1.70
D) $8.00 - ($1.50 + $6.30) = $0.20