Cotton Corp. currently makes 12,900 subcomponents a year in one of its factories. The unit costs to produce are:

	Per unit
Direct materials		$	24.00
Direct labor			22.00
Variable manufacturing overhead			14.00
Fixed manufacturing overhead			9.00
Total unit cost		$	69.00

An outside supplier has offered to provide Cotton Corp. with the 12,900 subcomponents at an $81.00 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

• $116,100 increase

• $270,900 decrease

• no change

• $77,400 increase