A company currently insources a starting assembly for a small engine it produces. An outside supplier has offered to provide the starter assembly at a cost of $8 per units. In-house cost information for the starter assembly is presented below (all amount are totals for the level of production):

Planned production 150,000 units

DM $ 400,000

DL $ 300,000

MOH $ 800,000

Total $1,500,000

Additional information: 25% of the manufacturing overhead is variable. $300,000 of the fixed portion of the overhead is allocated to the division, and will not change regardless of whether the starter assembly is insourced or outsourced. $200,000 of the overhead can be avoided by outsourcing. $100,000 of the fixed overhead is the division managers salary. The company must replace a manager in another division. The cost of hiring a new manager for the other division is $80,000. However, if the starter assembly is outsourced, the manager of the starting assembly division can be transferred to the other division, and a new hire will not be necessary.

1. How much will the company save (or lose) by continuing to insource the starter assemblies?
2. What are some qualitative issues the company should consider?