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 Amount Cost Driver Sales commissions $ 829,500   Boxes of yarn sold to retail stores Catalogs   313,000   Catalogs distributed Cost of catalog sales   149,600   Skeins sold through catalog Credit and collection   79,200   Number of retail orders Total selling costs $ 1,371,300       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 Catalog Sales Retail Sales Small 1–10 skeins 1–10 boxes 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 Medium Large Total Retail sales in boxes (12 skeins per box) 4,000 51,000 182,000 237,000 Catalog sales in skeins 83,000 56,000 48,000 187,000 Number of retail orders 525 2,615 4,060 7,200 Catalogs distributed 273,050 230,670 122,280 626,000   AND HERE IS THE ADDITIONAL SOLUTIONS. REDWOOD COMPANY Computation of Selling Costs By Order Size and Per Skein Within Each Order Size   Order Size   Small Medium Large Total Sales commissions $14,000selected answer correct $178,500selected answer correct $637,000selected answer correct $829,500 Catalogs 136,525selected answer correct 115,335selected answer correct 61,140selected answer correct 313,000 Cost of catalog sales 66,400selected answer correct 44,800selected answer correct 38,400selected answer correct 149,600 Credit and collection not attempted not attempted not attempted 0 Total cost for all orders of a given size $216,925 $338,635 $736,540 $1,292,100 Units (skeins) sold 131,000selected answer correct 668,000selected answer correct 2,232,000selected answer correct   Unit cost per order of a given size       Questions: 1. What is Unit cost per order of a given size small, medium, large? 2. Which options down below is correct and explian why? 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.

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:
 

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:
 

An analysis of the previous year’s records produced the following statistics.
 

AND HERE IS THE ADDITIONAL SOLUTIONS.

Questions:

1. What is Unit cost per order of a given size small, medium, large?
2. Which options down below is correct and explian why?

• 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.