Calla Company produces skateboards that sell for $68 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,100 skateboards per year. Annual costs for 80,100 skateboards follow.

Direct materials $ 897,120
Direct labor 608,760
Overhead 941,000
Selling expenses 559,000
Administrative expenses 463,000
Total costs and expenses $ 3,468,880

A new retail store has offered to buy 14,900 of its skateboards for $63 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
30 percent of overhead is fixed at any production level from 81,200 units to 90,000 units, the remaining 70% 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 $2.70 per unit selling expense for this order
Administrative expenses would increase by a $940 fixed amount.

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

direct materials = ($897,120 / 80,100 units) x 17,900 = $200,480
direct labor = ($608,760 / 80,100 units) x 17,900 = $136,040
overhead = ($658,700 / 80,100 units) x 17,900 = $147,200
selling expenses = [($335,400 / 80,100 units) x 17,900] + ($2.70 x 17,900) = $74,952 + $48,330 = $123,282
administrative expenses = $940
total incremental costs = $607,942

incremental gain from special order = $938,700 - $607,942 = $330,758

Income statement with the special order

total revenue = $6,385,500

- COGS = ($2,930,600)

gross profit = $3,454,900

- SG&A = ($1,146,222)

net income = $2,308,678