value: 4.00 points Calla Company produces skateboards that sell for $54 per unit

Question

value: 4.00 points Calla Company produces skateboards that sell for $54 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,500 skateboards per year. Annual costs for 80,500 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses S 861,350 660,100 941,000 552,000 464,000 Total costs and expenses $3,478.450 A new retail store has offered to buy 14,500 of its skateboards for $49 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 80,500 units to 95,000 units; the remaining 60% 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 $3 per unit selling expense for this order Administrative expenses would increase by a $820 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 calculation round your cost and expenses values to nearest whole decimal places.) CALLA COMPANY COMPARATIVE INCOME STATEMENTS Additional Combined Total Normal Volume

Explanation / Answer

CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal Volume Additional Volume Combined Total Sales 4347000 710500 5057500 Costs and expenses: Direct materials 8,61,350 1,55,150 1016500 Direct labor 6,60,100 1,18,900 779000 Overhead 9,41,000 1,01,698 10,42,698 Selling expenses 5,52,000 1,13,100 6,65,100 Administrative expenses 4,64,000 820 4,64,820 Total costs and expenses 34,78,450 4,89,668 39,68,118 Operating income 8,68,550 2,20,832 10,89,382

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