Division Y sells soybean paste internally to Division Z, which, in turn, produces soybean burgers that sell for $5 per pound. Division Y incurs costs of $0.75 per pound, while Division Z incurs additional costs of $2.50 per pound. Identify which of the following formulas correctly reflects the company's operating income.
A) $5.00 - ($0.25 + $1.25 + $3.50) = $- 0-
B) $5.00 - ($0.75 + $2.50) = $1.75
C) $5.00 - ($1.25 + $2.50) = $1.25
D) $5.00 - ($0.75 + $3.75) = $0.50

Question

Quizplus · Accepted Answer

The operating income is calculated by subtracting the total costs from the selling price. Division Y's cost is $0.75, and Division Z's additional cost is $2.50, totaling $3.25. Subtracting this from the selling price of $5.00 gives an operating income of $1.75.

Division Y Sells Soybean Paste Internally to Division Z, Which