Calla Company produces skateboards that sell for $63 per unit. The company currently has the capacity to produce 100,000 skateboards per year, but is selling 81,800 skateboards per year. Annual costs for 81,800 skateboards follow.

Direct materials	$	940,700
Direct labor		654,400
Overhead		942,000
Selling expenses		544,000
Administrative expenses		462,000
Total costs and expenses	$	3,543,100

A new retail store has offered to buy 18,200 of its skateboards for $58 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 81,800 units to 100,000 units; the remaining 60% of annual overhead costs are variable with respect to volume.
• Selling expenses are 60% variable with respect to number of units sold, and the other 40% 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 $900 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?

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CALLA COMPANY
COMPARATIVE INCOME STATEMENTS
	Normal Volume	Additional Volume	Combined Total
Costs and expenses:
Total costs and expenses	0	0	0
Operating income