Calla Company produces skateboards that sell for $69 per unit. The company currently has the capacity to produce 100,000 skateboards per year, but is selling 81,300 skateboards per year. Annual costs for 81,300 skateboards follow.

A new retail store has offered to buy 18,700 of its skateboards for $64 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.
• 30 percent of overhead is fixed at any production level from 81,300 units to 100,000 units; the remaining 70% 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 $1.60 per unit selling expense for this order.
• Administrative expenses would increase by a $910 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?

	Normal Volume	Additional Volume	Combined Total
Salesselected answer correct	not attempted	not attempted
Costs and expenses:
Direct materialsselected answer correct	not attempted	not attempted
Direct laborselected answer correct	not attempted	not attempted
Overheadselected answer correct	not attempted	not attempted
Overheadselected answer incorrect	not attempted	not attempted
Selling expensesselected answer correct	not attempted	not attempted
Selling expensesselected answer incorrect	not attempted	not attempted
Total costs and expenses	0	0	0

Direct materials	$	861,780
Direct labor		585,360
Overhead		947,000
Selling expenses		553,000
Administrative expenses		470,000
Total costs and expenses	$	3,417,140