1-Calla Company produces skateboards that sell for $61 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,400 skateboards per year. Annual costs for 80,400 skateboards follow.

Direct materials	$	900,480
Direct labor		667,320
Overhead		948,000
Selling expenses		543,000
Administrative expenses		461,000
Total costs and expenses	$	3,519,800

A new retail store has offered to buy 14,600 of its skateboards for $56 per unit. The store is in a different market from Calla's regular customers and would not affect regular sales. A study of its costs in anticipation of this additional business reveals the following:

• Direct materials and direct labor are 100% variable.
• 50 percent of overhead is fixed at any production level from 80,400 units to 95,000 units; the remaining 50% of annual overhead costs are variable with respect to volume.
• Selling expenses are 80% variable with respect to number of units sold, and the other 20% of selling expenses are fixed.
• There will be an additional $2.80 per unit selling expense for this order.
• Administrative expenses would increase by a $930 fixed amount.

Required: 1. Prepare a three-column comparative income statement that reports the following: a. Annual income without the special order. b. Annual income from the special order. c. Combined annual income from normal business and the new business. 2. Should Calla accept this order?

2-

Tyler Guitars makes acoustic and electric guitars. It is struggling to determine the profitability of each guitar and deciding on which guitar to focus its sales efforts. Tyler currently operates a single 8-hour shift for 22 days per month. The Tableau Dashboard shows data from the recent month.

1. The company is considering adding a second 8-hour shift for 22 days each month, which would increase fixed costs by $9,000. (a) Compute the most profitable sales mix for the company if it adds a second shift. (b) Should the company add the second shift?