Martinez Computers currently purchases for $40 each keyboard it uses in the 50,000 computers it makes and sells annually. Each computer uses one keyboard. The company has idle capacity and is considering whether to make the keyboards that it needs. Martinez estimates that materials and labor costs for making keyboards would be $25 each. In addition, supervisory salaries, rent, and other manufacturing costs would be $1,000,000. Allocated facility-level costs would amount to $175,000.
Required
a. Determine the change in net income that Martinez would experience if it decides to make the keyboards.
b. Discuss the qualitative factors that Martinez should consider.