Cotton Corp

question 58

Multiple Choice

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 accepts 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

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Definitions:

Product Placement

An advertising technique in which a company promotes its products through appearances in movies or on television shows or other media.

Advertisement

A marketing communication intended to inform, persuade, or remind consumers about a product or service, typically paid for and disseminated through various media channels.

Radio Advertising

A marketing strategy that uses radio stations to broadcast commercial messages to targeted audiences, leveraging the auditory medium to extensively reach listeners.

Direct Marketing

Advertising that communicates directly with consumers and organizations in an effort to provoke a response.