Generalware, Inc. sells a single product and reports the following per unit information from sales of 100,000 units:
| Per Unit | ||
| Sales | $ | 45.00 |
| Costs & expenses | ||
| Direct materials | 16.00 | |
| Direct labor | 9.00 | |
| Variable overhead | 3.00 | |
| Fixed overhead | 8.10 | |
| Variable administrative | 4.50 | |
| Fixed administrative | 4.00 | |
Normal capacity for Generalware is 125,000 units. A foreign company
wants to purchase 15,000 units. However, they are willing to pay
only $36 per unit for this one-time order. They also agree to pay
all freight costs. To fill the order, Generalware will incur normal
production costs. Total fixed overhead will have to be increased by
$60,000 to pay for equipment rentals and insurance. No additional
administrative costs (variable or fixed) will be incurred in
association with this special order.
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.
Homework Answers
Solution:
| Particulars | Normal Volume | Additional Volume | Combined Total |
| Sales | $45,00,000.00 | $5,40,000.00 | $50,40,000.00 |
| Costs and expenses: | |||
| Direct materials | $16,00,000.00 | $2,40,000.00 | $18,40,000.00 |
| Direct labor | $9,00,000.00 | $1,35,000.00 | $10,35,000.00 |
| Variable overhead | $3,00,000.00 | $45,000.00 | $3,45,000.00 |
| Fixed overehad | $8,10,000.00 | $60,000.00 | $8,70,000.00 |
| Variable Administrative | $4,50,000.00 | $0.00 | $4,50,000.00 |
| Fixed administrative | $4,00,000.00 | $0.00 | $4,00,000.00 |
| Total costs and expenses | $44,60,000.00 | $4,80,000.00 | $49,40,000.00 |
| Net Operating income | $40,000.00 | $60,000.00 | $1,00,000.00 |
| Incremental income (Loss) from new business | $60,000.00 |
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skateboards per year, but is selling 80,400 skateboards per year.
Annual costs for 80,400 skateboards follow.
Direct materials
$
916,560
Direct labor
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Overhead
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Calla Company produces skateboards that sell for $69 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,800 skateboards per year. Annual costs for 81,800 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $ 875,260 629,860 942,000 557,000 479,000 $3,483,120 A new retail store has offered to buy 13,200 of its skateboards for $64 per unit. The store is in a different market from Calla's...
Calla Company produces skateboards that sell for $67 per unit. The company currently has the capacity...
Calla Company produces skateboards that sell for $67 per unit. The company currently has the capacity to produce 90,000 skateboards per year, but is selling 80.500 skateboards per year. Annual costs for 80,500 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $ 845.250 692,300 949.000 541.888 462,888 $3,489,550 A new retail store has offered to buy 9,500 of its skateboards for $62 per unit. The store is in a different market from Calla's...
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Annual costs for 80,100 skateboards follow.
Direct materials
$
841,050
Direct labor
680,850
Overhead
948,000
Selling expenses
542,000
Administrative expenses
462,000
Total costs and expenses
$
3,473,900
A new retail store has offered to buy 14,900 of its skateboards for
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unit
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Calla Company produces skateboards that sell for $61 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
$
916,560
Direct labor
578,880
Overhead
947,000
Selling expenses
542,000
Administrative expenses
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Total costs and expenses
$
3,445,440
A new retail store has offered to buy 14,600 of its skateboards for
$56 per unit. The store is in a different market from...
Calla Company produces skateboards that sell for $62 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,900 skateboards per year. Annual costs for 81,900 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $ 958,230 679,770 942,000 547,000 469,000 $3,596,000 A new retail store has offered to buy 13,100 of its skateboards for $57 per unit. The store is in a different market from Calla's...
Calla Company produces skateboards that sell for $66 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,300 skateboards per year. Annual costs for 81,300 skateboards follow. Direct materials Direct labor Overhead Selling expenses Adninistrative expenses Total costs and expenses $ 837,390 585,360 95e,ede 551,080 476, eae $3,399,750 A new retail store has offered to buy 13,700 of its skateboards for $61 per unit. The store is in a different market from...
Calla Company produces skateboards that sell for $69 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,800 skateboards per year. Annual costs for 81,800 skateboards follow. Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses $ 875,260 629,860 942,000 557,000 479,000 $3,483,120 A new retail store has offered to buy 13,200 of its skateboards for $64 per unit. The store is in a different market from Calla's...
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Chap 23 Homework Seved Calla Company produces skateboards that sell for $58 per unit. The company currently has the capacity to produce 95,000 skateboards per year, but is selling 81,400 skateboards per year. Annual costs for 81,400 skateboards follow Direct materials Direct labor Overhead Selling expenses Administrative expenses Total costs and expenses 5887,260 716,320 948,000 546,000 465,000 $3,562,580 points Skipped Book A new retail store has offered to buy 13.600 of its skateboards for $53 per unit. The store is...
Calla Company produces skateboards that sell for $61 per unit.
The company currently has the capacity to produce 95,000
skateboards per year, but is selling 80,100 skateboards per year.
Annual costs for 80,100 skateboards follow.
Direct materials
$
841,050
Direct labor
680,850
Overhead
948,000
Selling expenses
542,000
Administrative expenses
462,000
Total costs and expenses
$
3,473,900
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