Calla Company produces skateboards that sell for $54 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,600 skateboards per year. Annual costs for 80,600 skateboards follow.

Direct materials$886,600Direct labor677,040Overhead946,000Selling expenses558,000Administrative expenses465,000Total costs and expenses$3,532,640

A new retail store has offered to buy 14,400 of its skateboards for $49 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.
• 40 percent of overhead is fixed at any production level from 80,600 units to 95,000 units; the remaining 60% of annual overhead costs are variable with respect to volume.
• Selling expenses are 70% variable with respect to number of units sold, and the other 30% of selling expenses are fixed.
• There will be an additional $1.20 per unit selling expense for this order.
• Administrative expenses would increase by a $870 fixed amount.

Required:

1.Create athree-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?