Calla Company produces skateboards that sell for $68 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,900 skateboards per year. Annual costs for 81,900 skateboards follow.

Direct materials $933,660

Direct labor 671,580

Overhead 955,000

Selling expenses 546,000

Administrative expenses 472,000

Total costs and expenses $3,578,240

A new retail store has offered to buy 13,100 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 81,900 units to 95,000 units; the remaining 50% 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 $2.00 per unit selling expense for this order.
• Administrative expenses would increase by a $980 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?