Score Name Section Problem (10 points). Peach World manufactures fine woodwind instruments. It costs Peach World the following to manufacture and sell a Penache Clarinet, one of its top of the line musical instruments. PEACH WORLD COST INFORMATION RELATED TO MANUFACTURE AND SALE OF PENACHE CLARINET Direct Materials S 48.00 Direct Labor 64.00 12.50 15.00 Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Marketing and Administrative Costs Fixed Marketing and Administrative Costs 8.00 4.00 The fixed manufacturing overhead and the fixed marketing and administrative costs per unit are calculated based upon manufacturing and selling 500 clarinets per year. Currently, Peach World has the excess capacity to produce the 500 clarinets required. Peach World is considering the possibility of having an outside supplier manufacture their Penache Clarinet for them. The outside supplier has given Peach World a quote of $138.00 per clarinet to manufacture the 500 Penache Clarinets that they need to meet the annual demand. If Peach World does have the outside supplier make the clarinet for them, they will be able to avoid $4,000 in fixed manufacturing overhead costs. REQUIRED: (1) (2) Based upon the information provided, should Peach World continue to make the Penache Clarinet or should it buy the clarinet from the outside supplier? Explain your answer. Suppose that Peach World could use the excess capacity to manufacture another product that would earn a contribution margin of $12.000 but would then require that all fixed manufacturing overhead costs be incurred. Should Peach World make or buy the clarinets? Explain