Peach World manufactures fine woodwind instruments. Attached are the costs incurred by Peach World to manufacture...

  

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Peach World manufactures fine woodwind instruments. Attached are the costs incurred by Peach World to manufacture and sell a Penache Clarinet, one of its top of the line musical instruments. 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) Using the attached form and based upon the information provided, should Peach World continue to make the Penache Clarinet or should it buy the clarinet from the outside supplier? Provide an analysis and an explanation for 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. Using the attached form, provide an analysis to determine if Peach World should make or buy the clarinets with an explanation for your decision. PEACH WORLD COST INFORMATION RELATED TO MANUFACTURE AND SALE OF PENACHE CLARINET Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Marketing and Administrative Costs Fixed Marketing and Administrative Costs $ 48.00 64.00 12.50 15.00 8.00 4.00 (1) Costs To Make: Costs To Buy: Totals DECISION: PEACH WORLD MAKE OR BUY ANALYSIS-PENACHE CLARINET Make Buy Difference Peach World manufactures fine woodwind instruments. Attached are the costs incurred by Peach World to manufacture and sell a Penache Clarinet, one of its top of the line musical instruments. 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) Using the attached form and based upon the information provided, should Peach World continue to make the Penache Clarinet or should it buy the clarinet from the outside supplier? Provide an analysis and an explanation for 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. Using the attached form, provide an analysis to determine if Peach World should make or buy the clarinets with an explanation for your decision. PEACH WORLD COST INFORMATION RELATED TO MANUFACTURE AND SALE OF PENACHE CLARINET Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Marketing and Administrative Costs Fixed Marketing and Administrative Costs $ 48.00 64.00 12.50 15.00 8.00 4.00 (1) Costs To Make: Costs To Buy: Totals DECISION: PEACH WORLD MAKE OR BUY ANALYSIS-PENACHE CLARINET Make Buy Difference

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1 To determine whether Peach World should continue making the Penache Clarinet or buy it from the ou... View the full answer