ress produces textbooks for high school accounting courses. The company recently hired a new editor, Jaden Green, to handle production and sales of books for an introduction to accounting course. Jaden 's compensation depends on the gross margin associated with sales of this book. Jaden needs to decide how many copies of the book to produce. The following information is available for the fall semester 2017 :

Estimated sales	22,000	books
Beginning inventory	0	books
Average selling price	$86	per book
Variable production costs	$45	per book
Fixed production costs	$396,000	per semester

The fixed-cost allocation rate is based on expected sales and is therefore equal to $396,000 /22,000 books = $18 per book.

Jaden has decided to produce either 22,000 , 27,500 , or 29,700 books.

Calculate expected gross margin if Jaden produces 22,000 27,500 , or 29,700 books. (Make sure you include the production-volume variance as part of cost of goods sold.)

Calculate ending inventory in units and in dollars for each production level.

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 55 % of the cost of the ending inventory as an expense for evaluating the manager.

Include nonfinancial measures when evaluating management and rewarding performance.

Requirement 1. Calculate expected gross margin if Jaden produces 22,000 , 27,500 , or 29,700 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 22,000 books, then 27,500 books, and lastly 29,700 books. (Enter a "0" for any zero balance accounts. If an account does not have a variance, do not select a label.)

	22,000 books	27,500 books	29,700 books
Revenues
Cost of goods sold
Production-volume variance
Net cost of goods sold
Gross margin

Requirement 2. Calculate ending inventory in units and in dollars for each production level. (Complete all answer boxes. For amounts with a "0" unit or dollar balance, make sure to enter "0" in the appropriate cell.)

	22,000 books	27,500 books	29,700 books
Beginning inventory				books
Production
Sales
Ending inventory				books
Cost per book
Cost of ending inventory