A Swedish Telephone Maker Transfers Phones Costing $10 to Produce

A Swedish telephone maker transfers phones costing $10 to produce to its U.S.subsidiary for a transfer price of $20.The U.S.subsidiary sells the phones to retailers for $25 each and spends $5 per phone in promotion and distribution expense.The U.S.subsidiary:

A) makes $10, on which it pays U.S. taxes.
B) makes $15, all of which is taxable in the United States.
C) breaks even on the deal because it spends all its revenues.
D) makes a total of $25 on the deal because the phones are effectively free.