VII. Analysis of income effects of additional business Calla Company produces skateboards that sell for $50 per unit. The company currently has the capacity to produce 90,000 skateboards per year, but is selling 80,000 skateboards per year. Annual costs for 80,000 skateboards follow. Direct materials……………………………………………. $800,000 Direct laor……………………………………………………. 640,000 Overhead……………………………………………………. 960,000 Selling expenses…………………………………………. 560,000 Administrative expenses……………………………. 480,000 Total costs and expenses…………………………… $3,440,000 A new retail store has offered to buy 10,000 of its skateboards for $45 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: • Direct materials and direct labor are 100% variable. • Thirty percent of overhead is fixed at any production level from 80,000 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 per unit selling expense for this order. • Administrative expenses would increase by a $1,000 fixed amount. 1. 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