Highpointe Division Sells a Part Internally to Low Division

Multiple Choice

Highpointe Division sells a part internally to Low Division.Low Division uses the part to produce inexpensive products sold at discount stores.Highpointe Division incurs costs of $1.50 per part,while Low Division incurs additional costs of $4.80 per product.Highpointe Division sells the part to Low Division for $2.00 per part. Low Division can purchase the part from an outside supplier for $1.00 per part,but does not accept the offer.The final product is sold to external customers for $8.00 each.Which of the following formulas correctly reflects the company's operating income?

A) $8.00 - $1.50 - $4.80 - $2.00 - $1.00 = $(1.30)
B) $8.00 - $1.50 - $4.80 = $1.70
C) $8.00 - $4.80 - $2.00 = $1.20
D) $8.00 - $1.50 = $6.50