- Requirements 1. Calculate expected gross margin if Casie produces 26,000, 32,500, or 33,800 books. (Make sure you include the production-volume variance as part of cost of goods sold.) 2. Calculate ending inventory in units and in dollars for each production level. 3. Managers who are paid a bonus that is a function of gross margin may be inspired to produce a product in excess of demand to maximize their own bonus. There are metrics to discourage managers from producing products in excess of demand. Do you think the following metrics will accomplish this objective? Show your work. Incorporate a charge of 5% of the cost of the ending inventory as an expense for evaluating the manager. b. Include nonfinancial measures when evaluating management and rewarding performance. a. More Info Estimated sales 26,000 books Beginning inventory O books Average selling price $84 per book Variable production costs $56 per book Fixed production costs $624,000 per semester The fixed-cost allocation rate is based on expected sales and is therefore equal to $624,000 = 26,000 books = $24 per book. Horizon Press produces textbooks for high school accounting courses. The company recently hired a new editor, Casie Green, to handle production and sales of books for an introductory accounting course. Casie's compensation depends on the gross margin associated with sales of this book. Casie needs to decide how many copies of the book to produce. The following information is available for the fall semester 2020: (Click the icon to view the information.) Casie has decided to produce either 26,000, 32,500, or 33,800 books. Read the requirements. Requirement 1. Calculate expected gross margin if Casie produces 26,000, 32,500, or 33,800 books. (Make sure you include the production-volume variance as part of cost of goods sold.) Calculate the gross margin for each level of production. Begin with 26,000 books, then 32,500 books, and lastly 33,800 books. (Enter a "0" for any zero balance accounts. If an account does not have a variance, do not select a label.) 26,000 books $2,184,000 32,500 books 2,184,000 Revenues Cost of goods sold 2,080,000 2,080,000 0 Production-volume variance 2.080.000 Net cost of goods sold $ 104,000 Gross margin