Cotton Corp. currently makes 9,800 subcomponents a year in one of its factories. The unit costs to produce are:

	Per unit
Direct materials		$	29.00
Direct labor			25.00
Variable manufacturing overhead			18.00
Fixed manufacturing overhead			10.00
Total unit cost		$	82.00

An outside supplier has offered to provide Cotton Corp. with the 9,800 subcomponents at an $83.00 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

• $107,800 decrease

• $98,000 increase

• $70,560 increase