Calla Company produces skateboards that sell for $55 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,800 skateboards per year. Annual costs...

Calla Company produces skateboards that sell for $55 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,800 skateboards per year. Annual costs for 81,800 skateboards follow.

A new retail store has offered to buy 13,200 of its skateboards for $50 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 81,800 units to 95,000 units; the remaining 60% of annual overhead costs are variable with respect to volume.


• Selling expenses are 60% variable with respect to number of units sold, and the other 40% 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 $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?