Sherman Manufacturing Company currently manufactures a component used in one of its products. 

The annual production costs for 10,000 components are as follows: 

Material cost $5 per unit 

Labor cost $4 per unit 

Overhead $1 per unit 

Batch-level set-up costs for the year $5,000 Product-level manager's salary $18,000 Allocated facility-level costs $12,000. 

An outside company has offered to supply 10,000 units of the component for $12.50 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.