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Textile Crafts Company (TCC) sells craft kits and supplies to retail outlets and through online sites such as Etsy.com. Some of the items are manufactured by TCC, 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, TCC 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:

Textile Crafts Company (TCC) sells craft kits and supplies to retail outlets and through online sites such as Etsy.com. Some of the items are manufactured by TCC, 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, TCC 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:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Textile Crafts Company (TCC) sells craft kits and supplies to retail outlets and through online sites such as Etsy.com. Some of the items are manufactured by TCC, 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, TCC 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 Pay-per-click/Search engine optimization Cost of online sales Credit and collection Total selling costs Order Size Small Medium Large 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 online sales. The cost of online sales includes technology infrastructure costs and the wages of personnel who process the online 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 Online Sales 1 to 10 skeins 1 to 10 boxes 11 to 20 skeins Over 20 skeins 11 to 20 boxes Over 20 boxes An analysis of the previous year's records produced the following statistics. Items Retail sales boxes (12 skeins per box) Online sales, skeins Number of retail orders Number of online Small 6,000 96,000 655 268,175 Sales commissions Pay-per-click/Search engine optimization Cost of online sales Credit and collection Total cost for all orders of a given size Units (skeins) sold Unit cost per order of a given size Amount $814,500 453,240 158, 200 99,900 $ 1,525,840 $ Small Order Size Medium 70,500 69,000 3,265 280,525 Required: 1. Prepare a schedule showing TCC's total selling cost for each order size and the per-skein selling cost within each order size. Note: Round your intermediate calculations and unit cost per order to 2 decimal places. TEXTILE CRAFT COMPANY Computation of Selling Costs By Order Size and Per Skein Within Each Order Size Cost Driver Boxes of yarn sold to retail stores Number of online leads Skeins sold online Number of retail orders 0 $ Large 195,000 61,000 7,180 206,700 Medium ? Management may want to consider offering discounts for large orders. 7 Small orders are preferable to medium sized orders. 7 Large orders are preferable to medium sized orders. 7 Marketing should be focused on small sized orders. Order Size Total 271,500 226,000 11,100 755,400 10 S Large $ 0 $ Total 0 0 0 0 0 2. An analysis of selling costs shows: Note: 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. Check my work is not available.
Transcribed Image Text:Textile Crafts Company (TCC) sells craft kits and supplies to retail outlets and through online sites such as Etsy.com. Some of the items are manufactured by TCC, 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, TCC 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 Pay-per-click/Search engine optimization Cost of online sales Credit and collection Total selling costs Order Size Small Medium Large 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 online sales. The cost of online sales includes technology infrastructure costs and the wages of personnel who process the online 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 Online Sales 1 to 10 skeins 1 to 10 boxes 11 to 20 skeins Over 20 skeins 11 to 20 boxes Over 20 boxes An analysis of the previous year's records produced the following statistics. Items Retail sales boxes (12 skeins per box) Online sales, skeins Number of retail orders Number of online Small 6,000 96,000 655 268,175 Sales commissions Pay-per-click/Search engine optimization Cost of online sales Credit and collection Total cost for all orders of a given size Units (skeins) sold Unit cost per order of a given size Amount $814,500 453,240 158, 200 99,900 $ 1,525,840 $ Small Order Size Medium 70,500 69,000 3,265 280,525 Required: 1. Prepare a schedule showing TCC's total selling cost for each order size and the per-skein selling cost within each order size. Note: Round your intermediate calculations and unit cost per order to 2 decimal places. TEXTILE CRAFT COMPANY Computation of Selling Costs By Order Size and Per Skein Within Each Order Size Cost Driver Boxes of yarn sold to retail stores Number of online leads Skeins sold online Number of retail orders 0 $ Large 195,000 61,000 7,180 206,700 Medium ? Management may want to consider offering discounts for large orders. 7 Small orders are preferable to medium sized orders. 7 Large orders are preferable to medium sized orders. 7 Marketing should be focused on small sized orders. Order Size Total 271,500 226,000 11,100 755,400 10 S Large $ 0 $ Total 0 0 0 0 0 2. An analysis of selling costs shows: Note: 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. Check my work is not available.
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