Calla Company produces skateboards that sell for $55 per unit. The company curre
ID: 2401662 • Letter: C
Question
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 80,400 skateboards per year. Annual costs for 80,400 skateboards follow. Direct materials Direct labor Overhead Selling expenses 876,360 619,080 942,000 548,000 461,000 Total costs and expenses $3,446,440 A new retail store has offered to buy 14,600 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. 50 percent of overhead is fixed at any production level from 80,400 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 $2.5 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 AdditionalCombined Total Normal Volume Costs and expensesExplanation / Answer
Answers
Total
Fixed
Variable
Variable cost per unit
Direct Material
$ 8,76,360.00
$ -
$ 8,76,360.00
$ 10.900000
Direct labor
$ 6,19,080.00
$ -
$ 6,19,080.00
$ 7.700000
Overhead
$ 9,42,000.00
$ 4,71,000.00
$ 4,71,000.00
$ 5.858209
Selling expenses
$ 5,48,000.00
$ 1,64,400.00
$ 3,83,600.00
$ 4.771144
Administrative expenses
$ 4,61,000.00
$ 4,61,000.00
$ -
$ -
Total
$ 34,46,440.00
$ 10,96,400.00
$ 23,50,040.00
$ 29.229353
Normal Volume: 80400 units
Units
per unit
Variable amount
Fixed Amount
Total Amount
Sales revenue
80400
$ 55.000000
$ 44,22,000
$ -
$ 44,22,000
Cost & Expenses:
Direct Material
80400
$ 10.900000
$ 8,76,360
$ -
$ 8,76,360
Direct labor
80400
$ 7.700000
$ 6,19,080
$ -
$ 6,19,080
Overhead
80400
$ 5.858209
$ 4,71,000
$ 4,71,000
$ 9,42,000
Selling expenses
80400
$ 4.771144
$ 3,83,600
$ 1,64,400
$ 5,48,000
Administrative expenses
80400
$ -
$ -
$ 4,61,000
$ 4,61,000
Note: Selling expense per unit will be different from above, and administrative fixed cost is to increase from above
Additional Volume: 14600 units
Units
per unit
Variable amount
Fixed Amount
Total Amount
Sales revenue
14600
$ 55.000000
$ 8,03,000
$ -
$ 8,03,000
Cost & Expenses:
Direct Material
14600
$ 10.900000
$ 1,59,140
$ -
$ 1,59,140
Direct labor
14600
$ 7.700000
$ 1,12,420
$ -
$ 1,12,420
Overhead
14600
$ 5.858209
$ 85,530
$ -
$ 85,530
Selling expenses
14600
$ 7.271144
$ 1,06,159
$ -
$ 1,06,159
Administrative expenses
14600
$ -
$ -
$ 820
$ 820
Normal Volume
Additional Volume
Combined Total
Sales revenue
$ 44,22,000
$ 8,03,000
$ 52,25,000
Cost & Expenses:
Direct Material
$ 8,76,360
$ 1,59,140
$ 10,35,500
Direct labor
$ 6,19,080
$ 1,12,420
$ 7,31,500
Overhead
$ 9,42,000
$ 85,530
$ 10,27,530
Selling expenses
$ 5,48,000
$ 1,06,159
$ 6,54,159
Administrative expenses
$ 4,61,000
$ 820
$ 4,61,820
Total Cost & Expenses
$ 34,46,440
$ 4,64,069
$ 39,10,509
Operating Income
$ 9,75,560
$ 3,38,931
$ 13,14,491
Total
Fixed
Variable
Variable cost per unit
Direct Material
$ 8,76,360.00
$ -
$ 8,76,360.00
$ 10.900000
Direct labor
$ 6,19,080.00
$ -
$ 6,19,080.00
$ 7.700000
Overhead
$ 9,42,000.00
$ 4,71,000.00
$ 4,71,000.00
$ 5.858209
Selling expenses
$ 5,48,000.00
$ 1,64,400.00
$ 3,83,600.00
$ 4.771144
Administrative expenses
$ 4,61,000.00
$ 4,61,000.00
$ -
$ -
Total
$ 34,46,440.00
$ 10,96,400.00
$ 23,50,040.00
$ 29.229353
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