Question

Calla Company produces skateboards that sell for $51 per unit. The company currently has the capacity...

Calla Company produces skateboards that sell for $51 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,200 skateboards per year. Annual costs for 80,200 skateboards follow.

Direct materials $ 914,280
Direct labor 641,600
Overhead 956,000
Selling expenses 550,000
Administrative expenses 460,000
Total costs and expenses $ 3,521,880


A new retail store has offered to buy 14,800 of its skateboards for $46 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.

50 percent of overhead is fixed at any production level from 80,200 units to 95,000 units; the remaining 50% 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 $2.20 per unit selling expense for this order.

Administrative expenses would increase by a $930 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 calculations. Round your cost and expenses to nearest whole number.)

CALLA COMPANY
COMPARATIVE INCOME STATEMENTS
Normal Volume Additional Volume Combined Total
Sales $4,090,200 $680,800 $4,771,000
Costs and expenses:
Direct materials 914,280 914,280
Direct labor 641,600 641,600
Total costs and expenses 1,555,880 0 1,555,880
Operating income $2,534,320 $680,800 $3,215,120

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Calla Company produces skateboards that sell for $51 per unit. The company currently has the capacity...
Calla Company produces skateboards that sell for $51 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,200 skateboards per year. Annual costs for 80,200 skateboards follow. Direct materials $ 914,280 Direct labor 641,600 Overhead 956,000 Selling expenses 550,000 Administrative expenses 460,000 Total costs and expenses $ 3,521,880 A new retail store has offered to buy 14,800 of its skateboards for $46 per unit. The store is in a different market from...
Calla Company produces skateboards that sell for $66 per unit. The company currently has the capacity...
Calla Company produces skateboards that sell for $66 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 82,000 skateboards per year. Annual costs for 82,000 skateboards follow.   Direct materials $ 975,800   Direct labor 697,000   Overhead 946,000   Selling expenses 557,000   Administrative expenses 464,000     Total costs and expenses $ 3,639,800   A new retail store has offered to buy 13,000 of its skateboards for $61 per unit. The store is in a different market from...
Calla Company produces skateboards that sell for $64 per unit. The company currently has the capacity...
Calla Company produces skateboards that sell for $64 per unit. The company currently has the capacity to produce 90,000 skateboards per year, but is selling 81,000 skateboards per year. Annual costs for 81,000 skateboards follow. Direct materials $ 955,800 Direct labor 664,200 Overhead 954,000 Selling expenses 541,000 Administrative expenses 465,000 Total costs and expenses $ 3,580,000 A new retail store has offered to buy 9,000 of its skateboards for $59 per unit. The store is in a different market from...
Problem 23-1A Analysis of income effects of additional business LO A1 Jones Products manufactures and sells...
Problem 23-1A Analysis of income effects of additional business LO A1 Jones Products manufactures and sells to wholesalers approximately 400,000 packages per year of underwater markers at $3.87 per package. Annual costs for the production and sale of this quantity are shown in the table. Direct materials $ 512,000 Direct labor 128,000 Overhead 384,000 Selling expenses 160,000 Administrative expenses 107,000 Total costs and expenses $ 1,291,000 A new wholesaler has offered to buy 67,000 packages for $3.37 each. These markers...
Farrow Co. expects to sell 300,000 units of its product in the next period with the...
Farrow Co. expects to sell 300,000 units of its product in the next period with the following results. Sales (300,000 units) $ 4,500,000 Costs and expenses Direct materials 600,000 Direct labor 1,200,000 Overhead 300,000 Selling expenses 450,000 Administrative expenses 771,000 Total costs and expenses 3,321,000 Net income $ 1,179,000 The company has an opportunity to sell 30,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor costs per unit...
PLEASE DO PROBLEM Farrow Co. expects to sell 300,000 units of its product in the next...
PLEASE DO PROBLEM Farrow Co. expects to sell 300,000 units of its product in the next period with the following results. Sales (300,000 units) $ 4,500,000 Costs and expenses Direct materials 600,000 Direct labor 1,200,000 Overhead 300,000 Selling expenses 450,000 Administrative expenses 771,000 Total costs and expenses 3,321,000 Net income $ 1,179,000 The company has an opportunity to sell 30,000 additional units at $13 per unit. The additional sales would not affect its current expected sales. Direct materials and labor...
Exercise 23-2 Accept new business or not LO A1 Farrow Co. expects to sell 300,000 units...
Exercise 23-2 Accept new business or not LO A1 Farrow Co. expects to sell 300,000 units of its product in the next period with the following results. Sales (300,000 units) $ 4,500,000 Costs and expenses Direct materials 600,000 Direct labor 1,200,000 Overhead 300,000 Selling expenses 450,000 Administrative expenses 771,000 Total costs and expenses 3,321,000 Net income $ 1,179,000 The company has an opportunity to sell 30,000 additional units at $12 per unit. The additional sales would not affect its current...
ABC Company produces a single unit that it sells for $20 per unit. ABC has the...
ABC Company produces a single unit that it sells for $20 per unit. ABC has the capacity to produce 28,000 units each month. ABC is currently selling 19,000 units each month. The costs associated with each unit appears below: direct materials $5.00 direct labor 2.50 variable overhead 1.00 fixed overhead 1.50 variable selling costs 4.00 fixed selling costs 0.75 ABC Company has received a special order from a customer who wants to purchase 18,000 units at a reduced price of...
Glade Company produces a single product. The costs of producing and selling a single unit of...
Glade Company produces a single product. The costs of producing and selling a single unit of this product at the company's current activity level of 8,000 units per month are: Direct Materials ……………………………………………........................ $2.50 Direct labor ……………………………………………………...………… $3.00 Variable manufacturing overhead ……………………………..………….. .$0.50 Fixed Manufacturing Overhead …………………………...……………….. $4.25 Variable selling and administrative expenses………………………………. $1.50 Fixed selling and administrative expenses………………………………….. $2.00 The normal selling price is $15 per unit. The company's capacity is 10,000 units per month. An order has been...
Delta Company produces a single product. The cost of producing and selling a single unit of...
Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 90,000 units per year is:   Direct materials $ 2.00   Direct labor $ 3.00   Variable manufacturing overhead $ .90   Fixed manufacturing overhead $ 5.05   Variable selling and administrative expenses $ 1.80   Fixed selling and administrative expenses $ 2.00 The normal selling price is $20 per unit. The company’s capacity is 110,400 units per year. An order...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT