on the basis of the financial information harish has obtained, calculate the cost of making MTR 2000 inhouse in 2021? please share calculations b. please compa

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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make vs buy

haris aggarwal A management accountant with car udoyg is evaluating whether a componenet MTR2000 should continue to be manufatured by car or purchased fromoutside vendor company. outside vendor has submited a bid to manufature and supply the 32000units of MTR 2000 that car udyog willneed for 2021 ata selling price of rs. 173. harish has gatherd the following information regarding car udyog's costs to manufature 30000units of MTR-2000IN2020

direct materails                      19,50,000

direct manufaturing labour      12,00,000

plants space rental                       8,40,000

equipment leasing                        3,60,000

other manufaturing overhead      22,50,000

toatl manufaturing cots                 66,00,000

harish has also collected the following information related to manufaturing MTR2000:

a. price of direcct materials used in the production of MTR 2000 are expected to increase by 8% in 2021

b. car udyog direct manufaturing labour contract calls for a 5% increase in 2021

c. car udyog can withdraw from the plant space rental agreement without any penalty. car udoyg will have no need for this space if MTR 2000 is not manufatured

d. the equipment lease can be terminated by paying rs. 60,000/-

e. 40% of the other manufaturing overhead is considerd variables. variavble overhead changes propotionaately with the number of units produced. the fixed componenet of other manufatureing overheads is expected to remain the same whether or not MTR2000 is manufatured required.

a.  on the basis of the financial information harish has obtained, calculate the cost of making MTR 2000 inhouse in 2021? please share calculations

b. please compare with the cost of outsourcing the product and whether it is profitable to buy or manufature MT 2000?

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