Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are: An outside supplier has offered to provide Cotton Corp with the 10,000 subcomponents at a $84.50 per unit price. Fixed overhead is not avoidable. If Cotton Corp rejects the outside offer, what will be the effect on short-term profits?
A) $260,000 increase
B) $195,000 decrease
C) no change
D) $65,000 increase

Question

Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are:  An outside supplier has offered to provide Cotton Corp with the 10,000 subcomponents at a $84.50 per unit price. Fixed overhead is not avoidable. If Cotton Corp rejects the outside offer, what will be the effect on short-term profits?
A) $260,000 increase 
B) $195,000 decrease 
C) no change 
D) $65,000 increase

Quizplus · Accepted Answer

The Answer of Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are:  An outside supplier has offered to provide Cotton Corp with the 10,000 subcomponents at a $84.50 per unit price. Fixed overhead is not avoidable. If Cotton Corp rejects the outside offer, what will be the effect on short-term profits?
A) $260,000 increase 
B) $195,000 decrease 
C) no change 
D) $65,000 increase