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: Amount Cost Dri 462,60e Boxes of yarn sold to retail stores 323,180 Catalogs distributed 188,688 Skeins sold through catalog Sales commissions Cost of catalog sales Credit and collection 72,600 Number of retail orders Total selling costs 966,388 The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted. ns 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 5ize Retail Sales Catalog Sales 1-10 skeins 11-20 skeins 1-10 boxes 11-20 boxes Medium 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: Small Medium 1-10 skeins 11-20 skeins Over 20 skeins 1-10 boxes 11-20 boxes Over 28 boxes An analysis of the previous year's records produced the following statistics Order Size Total Retail sales in boxes (12 skeins per box) Catalog sales in skeins Number of retail orders Catalogs distributed 46,000 181,000 6,600 230,690254,870 160,800 646,360 81,000 54,000 505 2,515 3,580 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 colculations and unit cost per order to 2 decimal places.) order size. (Round your Order Size Total C Cost Help Save & Ch or all 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
