Division Y Sells a Food Product Internally to Division Z

Multiple Choice

Division Y sells a food product internally to Division Z.Division Z uses the food product to produce vegetarian burgers that sell for $5 per pound.Division Y incurs costs of $0.75 per pound to produce the food product and sells the food product to Division Z for $1.00 per pound.Division Z incurs additional costs of $2.50 per pound to produce the final product of vegetarian burgers.Division Z can purchase the food product needed from outside suppliers for $0.75 per pound,but does not do so.Which formula should be used to determine the company's operating income?

A) $5.00 - $0.75 - $1.00 - $0.75 - $2.50 = 0
B) $5.00 - $0.75 - $1.00 - $2.50 = $0.75
C) $5.00 - $0.75 - $2.50 = $1.75
D) $5.00 - $0.75 - $1.00 + $0.75 = $4.00