Calla Company produces skateboards that sell for $52 per unit. The company curre
ID: 2454952 • Letter: C
Question
Calla Company produces skateboards that sell for $52 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,800 skateboards per year. Annual costs for 80,800 skateboards follow.
A new retail store has offered to buy 14,200 of its skateboards for $47 per unit. The store is in a different market from Calla's regular customers and it would not affect regular sales. A study of its costs in anticipation of this additional business reveals the following:
30 percent of overhead is fixed at any production level from 80,800 units to 95,000 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.
Combined annual income from normal business and the new business.
Calla Company produces skateboards that sell for $52 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,800 skateboards per year. Annual costs for 80,800 skateboards follow.
LUITIOll GUl a dual title iOIT IIUITlal DuSlness and the new business CALLA COMPANY COMPARATIVE INCOME STATEMENTS Normal volume Additional Combined total Volume Sales Costs and expenses Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses Operating incomeExplanation / Answer
Comparative Income statement Report:
Note: 1. 70% of annual overhead cost @ 8.31 are considered as variable overhead in Special order
2. 60% of selling expenses @4.15+ 1.70 are considered as variable expense in special order
3. Administrative expenses increased by $ 970 in special order.
CALLA COMPANY COMPARATIVE INCOME STATEMENTS Nominal Volume Additional Volume Combined Total A. Sales @ 52 per unit $42,01,600.00 $6,67,400.00 $48,69,000.00 Cost and expenses: a. Direct material @ 10.4 per unit 8,40,320.00 1,47,680.00 9,88,000.00 b. Direct labor @8.1 per unit 6,54,480.00 1,15,020.00 7,69,500.00 c. Overhead @11.88 9,60,000.00 1,18,002.00 10,78,002.00 d. Selling expenses @6.93 5,60,000.00 83,070.00 6,43,070.00 e. Administrative expenses 4,69,000.00 970.00 4,69,970.00 B. Total cost and expenses (a:e) 34,83,800.00 4,64,742.00 39,48,542.00 Operating Income (A-B). $7,17,800.00 $2,02,658.00 $9,20,458.00Related Questions
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