Answer:
Calla Company
Three-column comparative Income Statement:
Normal Special order Total
Sales Revenue $4,580,800 $673,200 $5,254,000
Cost of sales:
Direct materials $ 981,600 $158,400 $1,140,000
Direct labor 613,500 99,000 712,500
Overhead 954,000 76,973 1,030,973
Selling expenses 558,000 84,151 642,151
Administrative expenses 477,000 890 477,890
Total costs and expenses $ 3,584,100 $419,414 $4,003,514
Net income $ 996,700 $ 253,786 $1,250,486
Explanation:
a) Data and Calculations:
Annual production capacity = 95,000 units
Actual annual production and sales = 81,800 units
Special order (units) = 13,200
Selling price (normal) = $56 per unit
Special order selling price = $51 per unit
Direct materials $ 981,600
Direct labor 613,500
Overhead 954,000
Selling expenses 558,000
Administrative expenses 477,000
Total costs and expenses $ 3,584,100
Three-column comparative Income Statement:
Normal Special order Total
Sales volume 81,800 13,200 95,000
Selling price $56 $51
Sales Revenue $4,580,800 $673,200 $5,254,000
Cost of sales:
Direct materials $ 981,600 $158,400 $1,140,000
Direct labor 613,500 99,000 712,500
Overhead 954,000 76,973 1,030,973
Selling expenses 558,000 84,151 642,151
Administrative expenses 477,000 890 477,890
Total costs and expenses $ 3,584,100 $419,414 $4,003,514
Net income $ 996,700 $ 253,786 $1,250,486
1. Direct materials cost per unit = $981,600/81,800 = $12
2. Direct labor cost per unit = $613,500/81,800 = $7.50
3. Variable Overhead cost = $954,000/2 = $477,000
Variable overhead cost per unit = $477,000/81,800 = $5.83129
4. Variable selling expenses = 70% of $558,000 = $390,600
Variable selling expenses per unit = $390,600/81,800 = $4.77506
Additional selling expense per unit = $6.37506 ($4.77506 + $1.60)
Selling expense for special order = 84,151($6.37506 * 13,200)
5. Administrative expenses increased by $890
