Exercise 5-33 ABC; Selling Costs (LO 5-2, 5-4, 5-6) Zodiac Model Rocketry Company sells model rocketry kits and supplies to retail outlets and through its catalog. Some of the items are manufactured by Zodiac, 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, Zodiac incurs substantial selling costs, and Jack Maxey, 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 rocket motors, Maxey 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 Driver Cost Category Sales Amount 675,000 295,400 Catalogs distributed Boxes of rocket motors sold to retail stores commissions Catalogs Costs of catalog Rocket motors sold througlh catalogs Number of retail orders 105,000 sales Credit and 60,000 collection Total selling costs $1,135,400 The rocket motors are sold to retail outlets in boxes, each containing 12 motors. The sale of partial boxes is not permitted. Commissions are paid on sales to retail outlets but not on catalog sales. The cost of catalog sales includes telephone costs and the wages of personnel who take the catalog orders. Maxey believes that the selling costs vary significantly with the size of the order. Order sizes are divided into three categories as follows Order Size Small Mediumm Catalog Sales 1-10 rocket motors 11-20 rocket motors Retail Sales 1-10 boxes of motors 11-20 boxes of motors Over 20 boxes of motors Large Over 20 rocket motors An analysis of the previous year's records produced the following statistics Order Size Small Medium Large Total 2,000 45,000 178,000225,000 44,000 175,000 254,300 211,300 125,200590,800 Retail sales in boxes (12 motors per box Catalog sales in units (i.e., motors) 79,000 52,000 Number of retail orders Catalogs distributed 4852,415 3,100 6,000 Required: 1. Prepare a schedule showing Zodiac Model Rocketry Company's total selling cost for each order size and the per-rocket motor selling cost within each order size. (Round your intermediate calculations and unit cost per order to 2 decimal places.) ZODIAC MODEL ROCKETRY COMPANY Computation of Selling Costs By Order Size and Per Motor Within Each Order Size Order Size Small Mediumm Large Total Sales commissions Catalogs Costs of catalog sales Credit and collection Total cost for all orders of a given size Units (motors) sold Unit cost per order of a given size 0 $ 2. An analysis of selling costs shows (Select all that apply.) Management may want to consider offering discounts for large orders Small orders are preferable to medium sized orders Large orders are preferable to medium sized orders Marketing should be focused on small sized orders
