Freddie's Fudge Factory currently makes fudge for retail and mail order customers. It also offers a variety of roasted nuts. Fudge sales have increased over the past year, so Freddie is considering outsourcing the roasted nuts and using the roasting space to make additional fudge. A reliable supplier has quoted a price of $0.85 per pound for the roasted nuts. The following amounts reflect the in-house manufacturing costs per pound for the roasted nuts:

Direct materials	$0.50
Direct labor	0.06
Unit-related support costs	0.10
Batch-related support costs	0.04
Product-sustaining support costs	0.05
Business-sustaining support costs	0.15
Total cost per pound	$0.90

Required:

a. Should Freddie's Fudge Factory outsource the roasted nuts? Why or why not? Discuss all items that should be considered.

b. What incentives can Freddie offer the supplier of the roasted nuts to encourage continued reliability?