Auto Manufacturing has been making all its components internally. It uses 20,000 of component A1 yearly and the manufacturing cost per unit of this component is as follows:

Direct material $2.80

Direct labour $1.40

Variable overhead $0.20

Fixed overhead $1.60

An outside supplier has offered to supply component A1 to Auto Manufacturing at $5 per unit.

(i) Should Auto Manufacturing buy the component from the outside supplier or continue to make it internally when 40% of the fixed overhead can be avoided if Auto Manufacturing stops producing this component?

(ii) List TWO (2) qualitative considerations that Auto Manufacturing should consider when making the decision.