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Calla Company produces skateboards that sell for $52 per unit. The company currently has the capacity to produce 100,000 skateboards per year, but is selling 81,200 skateboards per year. Annual costs for 81,200 skateboards follow.

A new retail store has offered to buy 18,800 of its skateboards for $47 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 81,200 units to 100,000 units; the remaining 60% 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 $2.00 per unit selling expense for this order.
• Administrative expenses would increase by a $970 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.

Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $ 885,080 617, 120 950,000 550,000 474,000 $3,476,200 CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal Volume Additional Volume Combined Total Costs and expenses: Total costs and expenses Operating income Should Calla accept this order

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