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 Amount Cost Driver 675,000 Boxes of yarn sold to retail stores 295, 400 Catalogs distributed 105,000 Skeins sold through catalog 60,000 Number of retail orders Credit and collection 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: Retail Sales 1-10 boxeз Order Size Catalog Sales 1-10 skeins 11-20 skeins Small Medium 11-20 boxes Large Over 20 skeins Over 20 boxes An analysis of the previous year's records produced the following statistics. Order Size Medium Retail sales in boxes (12 skeins per box) Catalog sales in skeins Number of retail orders Small 2,000 79,000 Large 178,000 44,000 3,100 125, 200 Total 225,000 175,000 6,000 590, 800 45,000 52,000 2,415 254,300 211,300 485 Catalogs distributed 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.) Answer is not complete. REDWOOD COMPANY Computation of Selling Costs By Order Size And Per Skein Within Each Order Size Order Size Small Medium Large Total 6,000 Os 135,000 O $ 534,000 Os 675,000 Sales commissions Catalogs Cost of catalog sales Credit and collection Total cost for all orders of a given $ 47,400 x 31,200 8 26.400 X 105,000 127,150 8 105,650 X 62,600 X 295,400 4,850 O 24,150 31,000 O 60,000 $ 185,400 $ 296,000 $ 654,000 $ 1,135,400 size Units (skeins) sold Unit cost per order of a given size

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Chapter1: Financial Statements And Business Decisions
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Exercise 5-35 ABC; Selling Costs (LO 5-2, 5-4)
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
Amount
Cost Driver
Catalogs
Cost of catalog sales
Credit and collection
675,000 Boxes of yarn sold to retail stores
295, 400 Catalogs distributed
105,000 Skeins sold through catalog
60,000 Number of retail orders
Total selling costs
$1,135,400
The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted.
Commissions are paid on sales to retail outlets but not on catalog sales. The cost of catalog sales includes telephone costs and the
wages of personnel who take the catalog orders. Jackson believes that the selling costs vary significantly with the size of the order.
Order sizes are divided into three categories as follows:
Order Size
Small
Catalog Sales
Retail Sales
1-10 boxes
1-10 skeins
Medium
11-20 skeins
11-20 boxes
Large
Over 20 skeins
Over 20 boxes
An analysis of the previous year's records produced the following statistics.
Order Size
Small
2,000
79,000
485
254,300 211, 300
Medium
45,000
52,000
2,415
Large
178,000
Retail sales in boxes (12 skeins per box)
Catalog sales in skeins
Number of retail orders
44,000
3,100
125, 200
Total
225,000
175,000
6,000
590,800
Catalogs distributed
Required:
1. Prepare a schedule showing Redwood Company's total selling cost for each order size and the per-skein selling cost within each
order size. (Round your intermediate calculations and unit cost per order to 2 decimal places.)
* Answer is not complete.
REDWOOD COMPANY
Computation of Selling Costs
By Order Size And Per Skein Within Each Order Size
Order Size
Small
Medium
Large
Total
Sales commissions
6,000 O$ 135,000 O $
534,000 O$ 675,000
Catalogs
Cost of catalog sales
Credit and collection
47,400 X
127,150 X
31,200 8
105,650 X
26,400 O
62,600 x
105,000
295,400
4,850
O
24,150 O
31,000 O
60,000
Total cost for all orders of a given
size
Units (skeins) sold
Unit cost per order of a given
$ 185,400
$ 296,000
$ 654,000
$ 1,135,400
size
e
Transcribed Image Text:Exercise 5-35 ABC; Selling Costs (LO 5-2, 5-4) 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 Amount Cost Driver Catalogs Cost of catalog sales Credit and collection 675,000 Boxes of yarn sold to retail stores 295, 400 Catalogs distributed 105,000 Skeins sold through catalog 60,000 Number of retail orders Total selling costs $1,135,400 The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted. Commissions are paid on sales to retail outlets but not on catalog sales. The cost of catalog sales includes telephone costs and the wages of personnel who take the catalog orders. Jackson believes that the selling costs vary significantly with the size of the order. Order sizes are divided into three categories as follows: Order Size Small Catalog Sales Retail Sales 1-10 boxes 1-10 skeins Medium 11-20 skeins 11-20 boxes Large Over 20 skeins Over 20 boxes An analysis of the previous year's records produced the following statistics. Order Size Small 2,000 79,000 485 254,300 211, 300 Medium 45,000 52,000 2,415 Large 178,000 Retail sales in boxes (12 skeins per box) Catalog sales in skeins Number of retail orders 44,000 3,100 125, 200 Total 225,000 175,000 6,000 590,800 Catalogs distributed Required: 1. Prepare a schedule showing Redwood Company's total selling cost for each order size and the per-skein selling cost within each order size. (Round your intermediate calculations and unit cost per order to 2 decimal places.) * Answer is not complete. REDWOOD COMPANY Computation of Selling Costs By Order Size And Per Skein Within Each Order Size Order Size Small Medium Large Total Sales commissions 6,000 O$ 135,000 O $ 534,000 O$ 675,000 Catalogs Cost of catalog sales Credit and collection 47,400 X 127,150 X 31,200 8 105,650 X 26,400 O 62,600 x 105,000 295,400 4,850 O 24,150 O 31,000 O 60,000 Total cost for all orders of a given size Units (skeins) sold Unit cost per order of a given $ 185,400 $ 296,000 $ 654,000 $ 1,135,400 size e
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.)
O Management may want to consider offering discounts for large orders.
O Small orders are preferable to medium sized orders.
O Large orders are preferable to medium sized orders.
O Marketing should be focused on small sized orders.
Transcribed Image Text: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.) O Management may want to consider offering discounts for large orders. O Small orders are preferable to medium sized orders. O Large orders are preferable to medium sized orders. O Marketing should be focused on small sized orders.
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