Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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,

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 $ 507,000 Boxes of yarn sold to retail stores
Catalogs 547,810 Catalogs distributed
Cost of catalog sales 124,800 Skeins sold through catalog
Credit and collection 74,400 Number of retail orders
Total selling costs $ 1,254,010

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 catalog sales. The cost of catalog sales includes telephone costs and the wages of personnel who take the catalog 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 Catalog Sales Retail Sales
Small 110 skeins 110 boxes
Medium 1120 skeins 1120 boxes
Large Over 20 skeins Over 20 boxes

An analysis of the previous years records produced the following statistics.

Order Size
Small Medium Large Total
Retail sales in boxes (12 skeins per box) 3,000 61,500 189,000 253,500
Catalog sales in skeins 90,000 63,000 55,000 208,000
Number of retail orders 595 2,965 5,740 9,300
Catalogs distributed 475,280 512,060 108,280 1,095,620

Required:

1. Prepare a schedule showing Redwood Companys total selling cost for each order size and the per-skein selling cost within each order size. (Round your intermediate calculations and unit cost per order to 2 decimal places.)

REDWOOD COMPANY

Computation of Selling Costs

By Order Size and Per Skein Within Each Order Size

Order Size

Small Medium Large Total

Sales commissions

Catalogs

Cost of catalog sales

Credit and collection

Total cost for all orders of a given size

Units (skeins) sold

Unit cost per order of a given size

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

More Books

Students also viewed these Accounting questions