Sheridan Manufacturing Company currently manufactures a component used in one of its products. The annual production costs for 5,000 components are as follows.

Material cost - $5 per unit

Labor cost - $4 per unit

Overhead - $1 per unit

Batch-level cost $5,000

Product-level manager's salary $18,000

Allocated facility-level costs $12,000

An outside company has offered to supply 5,000 units of the component for $13 each. If the company outsources the component, it will be able to rent out the idle factory space for $1,000 per month but will not terminate the product manager.

Required:

a) Prepare a quantitative analysis that indicates whether the component should outsources.

b) What qualitative factors should be considered in this decision.