Cotton Corp. currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are: Per unitDirect materials $32.50Direct labor 13.00Variable manufacturing overhead 19.50Fixed manufacturing overhead 26.00Total unit cost $91.00An outside supplier has offered to provide Cotton Corp. with the 10,000 subcomponents at an $84.50 per unit price. Fixed overhead is not avoidable. What is the maximum price Cotton Corp. should pay the outside supplier?
A. $65.00
B. $84.50
C. $58.50
D. $91.00
Answer: A
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