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Homework answers / question archive / Calla Company produces skateboards that sell for $66 per unit

Calla Company produces skateboards that sell for $66 per unit. The company currently has the capacity to produce 100,000 skateboards per year, but is selling 80,600 skateboards per year. Annual costs for 80,600 skateboards follow.

Direct materials | $ | 830,180 | |

Direct labor | 685,100 | ||

Overhead | 951,000 | ||

Selling expenses | 552,000 | ||

Administrative expenses | 464,000 | ||

Total costs and expenses | $ | 3,482,280 | |

A new retail store has offered to buy 19,400 of its skateboards for $61 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 80,600 units to 100,000 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 $1.20 per unit selling expense for this order.
- Administrative expenses would increase by a $890 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. **(Do not round your intermediate calculations. Round your cost and expenses to nearest whole number.)**

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