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Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are: Per unit Direct materials $ 34.50

Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are:

Per unit
Direct materials $ 34.50
Direct labor 15.00
Variable manufacturing overhead 21.50
Fixed manufacturing overhead 28.00
Total unit cost $ 99.00

An outside supplier has offered to provide Cotton Corp. with the 10,000 subcomponents at a $86.50 per unit price. Fixed overhead is not avoidable. If Cotton Corp. rejects the outside offer, what will be the effect on short-term profits?

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