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 byRedwood, while others are purchased for resale. For the products it manufactures, the company currently bases its selling prices on aproduct-costing system that accounts for direct material, direct labor, and the associated overhead costs. In addition to these productcosts, Redwood incurs substantial selling costs, and Roger Jackson, controller, has suggested that these selling costs should beincluded 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 fourcategories of selling costs and chosen cost drivers for each of these costs. The selling costs actually incurred during the past year andthe cost drivers are as follows:Cost CategorySales commissionsAmountCost DriverCatalogsCost of catalog salesCredit and collection675,000 Boxes of yarn sold to retail stores295, 400 Catalogs distributed105,000 Skeins sold through catalog60,000 Number of retail ordersTotal selling costs$1,135,400The knitting yarn is sold to retail outlets in boxes, each containing 12 skeins of yarn. The sale of partial boxes is not permitted.Commissions are paid on sales to retail outlets but not on catalog sales. The cost of catalog sales includes telephone costs and thewages of personnel who take the catalog orders. Jackson believes that the selling costs vary significantly with the size of the order.Order sizes are divided into three categories as follows:Order SizeSmallCatalog SalesRetail Sales1-10 boxes1-10 skeinsMedium11-20 skeins11-20 boxesLargeOver 20 skeinsOver 20 boxesAn analysis of the previous year's records produced the following statistics.Order SizeSmall2,00079,000485254,300 211, 300Medium45,00052,0002,415Large178,000Retail sales in boxes (12 skeins per box)Catalog sales in skeinsNumber of retail orders44,0003,100125, 200Total225,000175,0006,000590,800Catalogs distributedRequired:1. Prepare a schedule showing Redwood Company's total selling cost for each order size and the per-skein selling cost within eachorder size. (Round your intermediate calculations and unit cost per order to 2 decimal places.)* Answer is not complete.REDWOOD COMPANYComputation of Selling CostsBy Order Size And Per Skein Within Each Order SizeOrder SizeSmallMediumLargeTotalSales commissions6,000 O$ 135,000 O $534,000 O$ 675,000CatalogsCost of catalog salesCredit and collection47,400 X127,150 X31,200 8105,650 X26,400 O62,600 x105,000295,4004,850O24,150 O31,000 O60,000Total cost for all orders of a givensizeUnits (skeins) soldUnit cost per order of a given$ 185,400$ 296,000$ 654,000$ 1,135,400sizee 2. An analysis of selling costs shows. (You may select more than one answer. Single click the box with the question mark to producea check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Anyboxes 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.

A strategy for more accurately allocating overhead costs by tying them to specific activities is…

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