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 80,600 skateboards per year. Annual costs for 80,600 skateboards follow.

Direct materials	$	943,020
Direct labor		636,740
Overhead		954,000
Selling expenses		541,000
Administrative expenses		477,000
Total costs and expenses	$	3,551,760

A new retail store has offered to buy 19,400 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.
• 40 percent of overhead is fixed at any production level from 80,600 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 $3.00 per unit selling expense for this order.
• Administrative expenses would increase by a $940 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?

ew business. (Do not rour Ses to nearest whole number.) CALLA COMPANY COMPARATIVE INCOME STATEMENTS Additional Volume Normal Volume Combined Total Costs and expenses: 0. Total costs and expenses Operating income Required 2 >