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Cotton Corp currently makes 10,000 subcomponents a year in one of its factories. The unit costs to produce are:
Direct Materials 32.50
Direct Labor 13.00
Variable manufacturing overhead 19.50
Fixed manufacturing overhead 26.00
Problem 1: An outside supplier has offered to provide Cotton Corp with the 10,000 subcomponents at a P84.50 per unit price. Fixed overhead is not avoidable. What is the maximum price Cotton Corp should pay the outside supplier?
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