Do what?

I've encountered another Southern expression. It takes a few different forms, including "do what?," "what now?" and the ultimate, "do what now?" Here's an example of how this phrase is used.

Salmonista: I wasn't sure if people liked dark or milk chocolate, so I brought both.
Southern friend: Do what now?

In the context of this example, what was Southern friend saying?

A) What should I do with the chocolate?
B) Why did you bring two kinds of chocolate but no sweet tea? What kind of crazy Yankee are you?
C) Pardon me, I didn't catch what you said. Could you please repeat it?

Answer: C

I really don't get this expression. The most common version is "do what?" and whenever I hear it, I'm left scratching my head. Usually I did not use the verb "to do" in the preceding sentence. If I had, I would understand such a response.

Hypothetical example

Salmonista: Oh man, I have to do so much trigonometry homework tonight!
Southern friend: Do what?

See, this seems like a reasonable response. Maybe she couldn't tell if I said "geometry" or "trigonometry." So saying "do what" is asking "what are you going to do?" Even if Southern friend hadn't heard my whole statement, at least she caught that I had to do something.

But if I'm not talking about doing anything, then why would a person ask, "do what?" Why don't they say, "what?" or "huh?" or "what's that?" or "pardon?" or "speak up, darlin'!"

I can't explain it, so I'm comforted to know I'm not the only person wondering...