GregInc. makes GPS systems, which include several electronic components. Refneck Company has offered to supply these electronic components at a price of $60 each.

Greg uses 35,000 units of these components each year. Gregss unit cost to manufacture the components is as follows: Direct material $ 28.50 Direct labor 16.00 Variable overhead 11.00 Fixed overhead 17.50 Total $ 73.00

Required: a. Assume that none of the fixed overhead would be eliminated if the components are purchased. If Greg decides to purchase the components from Refneck, how much would its operating income increase or decrease? Should Greg continue to make the components or should Greg buy them from Refneck?

b. Now assume instead that 60% of Greg's fixed overhead would be eliminated if the electronic components were no longer produced in-house. If Greg decides to purchase the components from Refneck, how much would its operating income increase on decrease? Should Greg continue to make the components or should Greg buy them from Refneck?

c. In addition to the analysis of the impact on operating income, there are important qualitative factors that should be considered in the make or buy decision. Name two qualitative factors in the decision.