Set I Q. Harish Aggarwal, 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 2016 at a selling price of *173. Harish has gathered the following information regarding Maruti's costs to manufacture 30,000 units of MTR.2000 in 2015: Direct Materials Direct Labour Plant Space rental Equipment leasing Other manufacturing overhead Total Manufacturing costs *19,50,000 *12,00,000 8,40,000 *3,60,000 22,50,000 66,00,000 Harish has also collected the following information related to manufacturing MTR.2000: Prices of direct materials used in the production of MTR.2000 are expected to increase by 8% in 2016. Maruti Udyog's direct manufacturing labour contract calls for a 5% increase in 2016. 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. The equipment lease can be terminated by paying *60,000. 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. Required: On the basis of the financial information Harish has obtained, should Maruti Udyog make MTR.2000 or buy it in 2016? Show your calculations.