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. $675,000 Boxes of yam sold to retail store
Catalogs. 295,400 Catalogs distributed
Cost of catalogs ales. 105,000 Skeins sold through catalog
Credit and collection. 60,000 Number of retail orders
Total selling costs $1,1 35,400

The knitting yam is sold to retail outlets in boxes, each containing 12 skeins of yam. 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 skein 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.

Small Medium Large Total
Retail sales inboxes (12 skeins per box 20,000 45,000 178,000 225,000
Catalog sales in skeins. 79,000 52,000 44,000 175,000
Number of retail orders. 485 2415 3100 6,000
Catalogs distributed 254,300 211300 125,500 590,800

Required:
a. Prepare a schedule showing Redwood Company's total selling cost for each order size and the per skein selling cost within each order size.
b. Explain how the analysis of the selling costs for skeins of knitting yarn is likely to impact future pricing and product decisions at Redwood Company.