Calla Company produces skateboards that sell for $61 per unit The company currently has the capacity to produce 100,000 skateboards per year, but is selling 80,800 skateboards per year Annual costs for 80,800 skateboards follow Direct materials $ 896,880 Direct labor 735,280 Overhead 951,000 Selling expenses 546,000 Administrative expenses 474,000 Total costs and expenses $ 3,603,160 A new retail store has offered to buy 19,200 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 40 percent of overhead is fixed at any production level from 80,800 units to 100,000 units the remaining 60 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 40 per unit selling expense for this order Administrative expenses would increase by a $870 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 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 (Do not round your intermediate calculations Round your cost and expenses to nearest whole number ) Should Calla accept this order yes or no CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal Volume Additional Volume Combined Total Sales Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative expenses i 0 0 Total costs and expenses Operating income

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Calla Company produces skateboards that sell for $61 per unit. The company currently has the capacity to produce 100,000 skateboards per year, but is selling

Calla Company produces skateboards that sell for $61 per unit. The company currently has the capacity to produce 100,000 skateboards per year, but is selling 80,800 skateboards per year. Annual costs for 80,800 skateboards follow.


Direct materials	$	896,880
Direct labor		735,280
Overhead		951,000
Selling expenses		546,000
Administrative expenses		474,000
Total costs and expenses	$	3,603,160

A new retail store has offered to buy 19,200 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.
40 percent of overhead is fixed at any production level from 80,800 units to 100,000 units; the remaining 60% 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 $2.40 per unit selling expense for this order.
Administrative expenses would increase by a $870 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?

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. (Do not round your intermediate calculations. Round your cost and expenses to nearest whole number.)

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Should Calla accept this order? yes or no?

CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal Volume Additional Volume Combined Total Sales Costs and expenses: Direct materials Direct labor Overhead Selling expenses Administrative expenses i 0 0 Total costs and expenses Operating income