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	Amount			Cost Driver
Sales commissions	$	675,000		Boxes of yarn sold to retail stores
Catalogs		295,400		Catalogs distributed
Cost of catalog sales		105,000		Skeins sold through catalog
Credit and collection		60,000		Number of retail orders
Total selling costs	$	1,135,400

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)	2,000	45,000	178,000	225,000
Catalog sales in skeins	79,000	52,000	44,000	175,000
Number of retail orders	485	2,415	3,100	6,000
Catalogs distributed	254,300	211,300	125,200	590,800

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.)

Answer is complete but not entirely correct.

REDWOOD COMPANY
Computation of Selling Costs
By Order Size And Per Skein Within Each Order Size
	Order Size
	Small	Medium	Large	Total
Sales commissions	$6,000selected answer correct	$135,000selected answer correct	$534,000selected answer correct	$675,000
Catalogs	127,150selected answer correct	105,650selected answer correct	62,600selected answer correct	295,400
Cost of catalog sales	47,400selected answer correct	31,200selected answer correct	26,400selected answer correct	105,000
Credit and collection	4,850selected answer correct	24,150selected answer correct	31,000selected answer correct	60,000
Total cost for all orders of a given size	$185,400	$296,000	$654,000	$1,135,400
Units (skeins) sold	answer incorrect	answer incorrect	answer incorrect
Unit cost per order of a given size	answer incorrect	answer incorrect	answer incorrect

. 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.unchecked
• Small orders are preferable to medium sized orders.unchecked
• Large orders are preferable to medium sized orders.unchecked
• Marketing should be focused on small sized orders.