Calla Company produces skateboards that sell for $68 per unit. The company currently has the capacity to produce 90,000 skateboards per year, but is selling 81,400 skateboards per year. Annual costs for 81,400 skateboards follow.

Direct materials$879,120

Direct labor732,600

Overhead951,000

Selling expenses547,000

Administrative expenses463,000

Total costs and expenses$3,572,720

A new retail store has offered to buy 8,600 of its skateboards for $63 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 81,400 units to 90,000 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 $1.4 per unit selling expense for this order.

Administrative expenses would increase by a $910 fixed amount.

Required:

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.