Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ex 5 - 3 5 ( Algo ) ABC; Selling Costs ( LO 5 - 2 , 5 - 4 ) Textile Crafts Company (

Ex 5-35(Algo) ABC; Selling Costs (LO 5-2,5-4)
Textile Crafts Company (TCC) sells craft kits and supplies to retail outlets and through online sites such as
Etsy.com. Some of the items
are manufactured by TCC, while others are purchased for resale. For the products it manufactures, the company currently bases its
selling prices on a product-costing system that accounts for direct material, direct labor, and the associated overhead costs. In addition
o these product costs, TCC incurs substantial selling costs, and Roger Jackson, controller, has suggested that these selling costs
should be included in the product pricing structure.
After studying the costs incurred over the past two years for one of its products, skeins of knitting yarn, Jackson has selected four
categories of selling costs and chosen cost drivers for each of these costs. The selling costs actually incurred during the past year and
he cost drivers are as follows:
The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted.
Commissions are paid on sales to retail outlets but not on online sales. The cost of online sales includes technology infrastructure
costs and the wages of personnel who process the online orders. Jackson believes that the selling costs vary significantly with the size
of the order. Order sizes are divided into three categories as follows:Textile Crafts Company (TCC) sells craft kits and supplies to retail outlets and through online sites such as Etsy.com. Some of the items are manufactured by TCC, while others are purchased for resale. For the products it manufactures, the company currently bases its selling prices on a product-costing system that accounts for direct material, direct labor, and the associated overhead costs. In addition to these product costs, TCC incurs substantial selling costs, and Roger Jackson, controller, has suggested that these selling costs should be included in the product pricing structure.
After studying the costs incurred over the past two years for one of its products, skeins of knitting yarn, Jackson has selected four categories of selling costs and chosen cost drivers for each of these costs. The selling costs actually incurred during the past year and the cost drivers are as follows:
Cost Category Amount Cost Driver
Sales commissions $ 693,000 Boxes of yarn sold to retail stores
Pay-per-click/Search engine optimization 377,650 Number of online leads
Cost of online sales 121,200 Skeins sold online
Credit and collection 87,000 Number of retail orders
Total selling costs $ 1,278,850
The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted. Commissions are paid on sales to retail outlets but not on online sales. The cost of online sales includes technology infrastructure costs and the wages of personnel who process the online orders. Jackson believes that the selling costs vary significantly with the size of the order. Order sizes are divided into three categories as follows:
Order Size Online Sales Retail Sales
Small 1 to 10 skeins 1 to 10 boxes
Medium 11 to 20 skeins 11 to 20 boxes
Large Over 20 skeins Over 20 boxes
An analysis of the previous years records produced the following statistics.
Items Order Size Total
Small Medium Large
Retail sales boxes (12 skeins per box)2,00058,500187,000247,500
Online sales, skeins 88,00061,00053,000202,000
Number of retail orders 5752,8655,2608,700
Number of online leads 364,500228,600162,200755,300
Required:
Prepare a schedule showing TCCs total selling cost for each order size and the per-skein selling cost within each order size.
Note: Round your intermediate calculations and unit cost per order to 2 decimal places.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

QS 9000 Handbook A Guide To Registration And Audit

Authors: Jayanta Bandyopadhyay

1st Edition

157444011X, 978-1574440119

More Books

Students also viewed these Accounting questions

Question

1. Which position would you take?

Answered: 1 week ago