Calla Company produces skateboards that sell for $56 per unit. The company curre

Question

Calla Company produces skateboards that sell for $56 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,700 skateboards per year. Annual costs for 80,700 skateboards follow.

A new retail store has offered to buy 14,300 of its skateboards for $51 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:

40 percent of overhead is fixed at any production level from 80,700 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.

(Do not round your intermediate calculation round your cost and expenses values to nearest whole decimal places.)

Calla Company produces skateboards that sell for $56 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 80,700 skateboards per year. Annual costs for 80,700 skateboards follow.

Explanation / Answer

Answer:

COMPARATIVE INCOME STATEMENTS Particulars Normal Volume New Business Combines Sales 4519200 729300 5248500 Costs and expenses Direct materials 839280 148720 988000 Direct labor 661740 117260 779000 Overhead 953000 101323 1054323 Selling expenses 541000 111435 652435 Administrative expenses 464000 890 464890 total costs and expenses 3459020 479628 3938648 Operating income 1060180 249672 1309852

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