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Cotton Corp. currently makes 12,500 subcomponents a year in one of its factories. The unit costs to produce are: Direct materials Direct labor Variable manufacturing

Cotton Corp. currently makes 12,500 subcomponents a year in one of its factories. The unit costs to produce are: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total unit cost Per unit $24.00 20.00 19.00 9.00 $72.00 An outside supplier has offered to provide Cotton Corp. with the 12,500 subcomponents at an $76.00 per unit price. Fixed overhead is not avoidable. If Cotton Corp. accepts the outside offer, what will be the effect on short-term profits? Multiple Choice no change

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