Spencer Chemical Corporation produces an oil-based chemical product which it sells to paint

manufacturers. In 2017, the company incurred $344,000 of costs per month to produce 40,000

gallons of the chemical each month. The selling price of the chemical is $12.00 per gallon. The

costs per unit to manufacture a gallon of the chemical are presented below:

Direct materials

$6.00

Direct labor

1.20

Variable manufacturing overhead

.80

Fixed manufacturing overhead

.60

Total manufacturing costs

$8.60

The company is now considering manufacturing the paint itself. If the company processes the chemical further and manufactures the paint itself, the following additional costs per gallon will be incurred: Direct materials $1.70, Direct labor $.60, Variable manufacturing overhead $.50. No increase in fixed manufacturing overhead is expected. The company can sell the paint at $15.50 per gallon.

Gene Spencer, Jr., son of the Spencer Corporation's

President Gene Spencer, has informed your team that he is in line to take over the company next

year. He wants to know what income he could earn by simply ceasing operations and instead,

leasing the building to another manufacturing company.

He grew up in the business, and he is starting to burn out, and feels he should move to Hawaii

and learn how to surf and take life easy.

He has indicated to you that existing fixed manufacturing overhead would decrease by 60% and

he could lease the building and manufacturing equipment to another company for $36,000 per

month.

Please answer the below question:

Identify "Qualitative Factors" you feel Gene, Jr. should take into consideration