Redwood Company sells craft kits and supplies to retail outlets and through its catalog. Some of the items are manufactured by Redwood, 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, Redwood 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 Sales commissions Catalogs Cost of catalog sales Credit and collection Total selling costs Amount Cost Driver $ 462,000 Boxes of yarn sold to retail stores 323, 180 Catalogs distributed 108,600 Skeins sold through catalog 72,600 Number of retail orders $ 966,380 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 Small Medium Large Catalog Sales 1-10 skeins 11-20 skeins Over 20 skeins Retail Sales 1-10 boxes 1120 boxes Over 20 boxes An analysis of the previous year's records produced the following statistics. Retail sales in boxes (12 skeins per box) Catalog sales in skeins Number of retail orders Catalogs distributed Order Size Small Medium Large 3,000 48,000 180,000 81,000 54,000 46,000 505 2,515 3,580 230,690 254,870 160,800 Total 231,000 181,000 6,600 646,360 Required: 1. Prepare a schedule showing Redwood Company's 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.) Total $ 0 REDWOOD COMPANY Computation of Selling Costs By Order Size and Per Skein Within Each Order Size Order Size Small Medium Large Sales commissions Catalogs Cost of catalog sales Credit and collection Total cost for all orders of a given size $ 0 $ 0 $ Units (skeins) sold Unit cost per order of a given size 0 0 0 0 $ 0 2. An analysis of selling costs shows: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? 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
