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 Cost Driver Amount Boxes of yarn sold to retail stores Catalogs distributed Skeins sold through catalog 547,000 602,280 Catalogs Cost of catalog sales 139,200 93,600 Number of retail orders Credit and collection Total selling costs $1,382,080 The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted. Commissions are paid on sales to retail outlets but not on catalog sales. The cost of catalog sales includes telephone costs and the wages of personnel who take the catalog orders. Jackson believes that the selling costs vary significantly with the size of the order. Order sizes are divided into three categories as follows: Catalog Sales Order Size Small Retail Sales 1-10 skeins 1-10 boxes 11-20 skeins 11-20 boxes Medium Over 20 skeins Over 20 boxes Large An analysis of the previous year's records produced the following statistics. Order Size Medium Total Small Large Retail sales in boxes (12 skeins per box) Catalog sales in skeins 3,000 98,000 73,500 71,000 3,365 710,560 197,000 63,000 7,660 273,500 232,000 11,700 Number of retail orders 675 Catalogs distributed 315,200 178,800 1,204,560 Required: 1. Prepare a schedule showing Redwood Company's total selling cost for each order size and the per-skein selling cost within each order size. (Round your intermediate calculations and unit cost per order to 2 decimal places.) REDWOOD COMPANY Computation of Selling Costs By Order Size and Per Skein Within Each Order Size Order Size Small Total Medium Large Sales commissions Catalogs 0 Cost of catalog sales Credit and collection Total cost for all orders of a given size 0 Units (skeins) sold I t naz ssdss af o mi..an siss Cost of catalog sales Credit and collection 0 0$ 0$ Total cost for all orders of a given size 0 0 Units (skeins) sold Unit cost per order of a given size 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
