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 Amount Cost Driver $ 519,000 Boxes of yarn sold to retail stores 456,760 Catalogs distributed 128,400 Skeins sold through catalog 89, 100 Number of retail orders Total selling costs $1,193,260 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 Catalog Sales 1-10 skeins 11-20 skeins Retail Sales 1-10 boxes 11-20 boxes --- < Prey of Nevt I
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 Amount Cost Driver $ 519,000 Boxes of yarn sold to retail stores 456,760 Catalogs distributed 128,400 Skeins sold through catalog 89, 100 Number of retail orders Total selling costs $1,193,260 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 Catalog Sales 1-10 skeins 11-20 skeins Retail Sales 1-10 boxes 11-20 boxes --- < Prey of Nevt I
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text: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
$ 519,000 Boxes of yarn sold to retail stores
456,760 Catalogs distributed
128,400 Skeins sold through catalog
89, 100 Number of retail orders
Total selling costs
$1,193, 260
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 catal
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:
sales. The cost of catalog sales includes telephone costs and the
Order Size
Catalog Sales
1-10 skeins
Retail Sales
1-10 boxes
11-20 boxes
Small
Medium
11-20 skeins
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LUN
Transcribed Image Text:Order Size
Small
Medium
Large
191,000
57,000
6,220
183,160
Total
Retail sales in boxes (12 skeins per box)
Catalog sales in skeins
Number of retail orders
4,000
92,000
64,500
65,000
3,065
447,830
259,500
214,000
9,900
913,520
615
Catalogs distributed
282,530
Required:
1. Prepare a schedule showing Redwood Company's total selling cost for each order size and the per-skein selli
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
Medium
Large
Total
Sales commissions
Catalogs
Cost of catalog sales
Credit and collection
Total cost for all orders of a given size
Units (skeins) sold
Unit cost per order of a given size
T:TO_BUR
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