QUESTION IS BEING PROVIDED

PLEASE FILL THIS EXCEL Problem $2$: Make or Buy Decision: Harsh, a management accountant with the Maruti Udyog, is evaluating

whether a component MTR$.2000$ should continue to be manufactured by Maruti or purchased from

Outside Vendor Company. Outside Vendor has submitted a bid to manufacture and supply the $32,000$

units of MTR$.2000$ that Maruti Udyog will need for $2019$ at a selling price of INR $173.$ Harsh has gathered

the following information regarding Maruti's costs to manufacture $30,000$ units of MTR$-2000$ in $2018.$

Harsh has also collected the following information related to manufacturing MTR $2000$:

a$)$ Prices of direct materials used in the production of MTR$.2000$ are expected to increase by $8\%$ in

$2019$

b$)$ Maruti Udyog's direct manufacturing labor contract calls for a $5\%$ increase in $2019$

c$)$ Maruti Udyog can withdraw from the plant space rental agreement without any penalty. Maruti

Udyog will have no need for this space if MTR$.2000$ is not manufactured.

d$)$ The equipment lease can be terminated by paying INR $60,000$

e$)40\%$ of the other manufacturing overhead is considered variable. Variable overhead changes

proportionately with the number of units produced. The fixed component of other manufacturing

overhead costs is expected to remain the same whether or not MTR$.2000$ is manufactured.

Pradeep, plant manager at Maruti Udyog, indicates to Harsh that the current performance of the plant

can be significantly improved and that the cost increases he is assuming are unlikely to occur. Hence, the

analysis should be done assuming costs will be considerably below current levels. Harsh knows that

Pradeep is concerned about outsourcing MTR$.2000$ because it will mean that some of his close friends will

be laid off.

Harsh believes that it is unlikely that the plant will achieve the lower costs as Pradeep describes. He is very

confident about the accuracy of the information he has collected, but he is also unhappy about laying off

employees.

Based on the financial information Harsh has obtained, should Maruti Udyog make MTR$.2000$ or

buy it in $2019?$ Show your calculations.

What other factors should Maruti Udyog consider before deciding?

What should Harsh do in response to Pradeep's comments?SHEET