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Academia Press produces textbooks for high school accounting courses. The company recently hired a new editor, Bailey Groen, to handle production and sales of books for an introduction to accounting course. Bailey's compensation depends on the gross margin associated with sales of this book. Bailey needs to decide how many copies of the book to produce. The following information is available for the fall semester 2017: (Click the icon to view the information.) Bailey has decided to produce either 19,000. 26,600, or 28,500 books. Read the requirements. Requirement 1. Calculate expected gross margin if Bailey produces 19.000 26,600, or 28,500 books (Make sure you include the procuction volume variance as part of cost of goods sold.) Calculate the gross margin for each level of production. Begin with 19.000 books, then 26,600 books, and lastly 28,500 books. (Enter a "O" for any zero balance accounts. If an account does not have a variance, do not select a label.) . , a ) 19.000 books 26,600 books 28.500 books Revenues Cost of goods sold - i More Info - X Production-volume variance Netcost 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, Estimated sales 19.000 books Beginning Inventory O books Average selling price S 82 per book Variable production costs S 47 per book Fixed production costs S 475,000 per semester The fixed-cost allocation rate is based on expected sales and is therefore equal to $475,000/19.000 books = S25 per book. 19,000 books 26,600 books 28,500 books books books books Beginning inventory Production Sales Ending inventory books books books Print Done Cost per book Cost of ending inventory Academia Press produces textbooks for high school accounting courses. The company recently hired a new editor, Bailey Green, to handle production and sales of books for an introduction to accounting course. Bailey's compensation depends on the gross margin associated with sales of this book. Bailey needs to decide how many copies of the book to produce. The following information is available for the fall semester 2017: (Click the icon to view the information) Bailey has decided to produce either 19,000, 26,600 or 25,500 books. Read the requirements Requirement 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 a. Incorporate a charge of 5% of the cost of the ending inventory as an experise for evaluating the manager (Complete all answer boxes. For a 50 charge, make sure to enter "O" in the appropriate cell.) 19,000 books 26,600 books 28,500 books Gross margin Ending Inventory charge Adjusted gross margin Do you think the metric would accomplish the objective of discouraging managers from producing products in excess of demand? Adjusting for ending inventory to mechanically compensate for all of the increased income. In addition, it mitigate the increase in inventory associated with excess production. Therefore, it may be from the organization's standpoint. i More Info - b. Include nonfinancial measures when evaluating management and rewarding performance One nonfinancial measure is to compute the excess production ratio. Determine the formula, then compute the rato at each production level. (Round the ratios to two decimal places. II of books = Excess production ratio 19,000 = = 26,600 28,500 Estimated sales 19,000 books Beginning inventory O books Average selling price 5 82 per book Variable production costs 5 S 47 por hook Fixed production costs 5 475,000 per semester The fixed cost allocation rate is based cri expected sales and is therefore equal to $475,000/19,000 books = 525 per book A ratio of ending inventory to beginning inventory is The non-financial measures Choose from any list or enter any number in the input fields and then continue to the next question. Print Done - X Requirements 1. Calculate expected gross margin if Leslie produces 24,000, 30,000, or 36,000 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. a. Incorporate a charge of 10% of the cost of the ending inventory as an expense for evaluating the manager. b. Include nonfinancial measures when evaluating management and rewarding performance. . More info Estimated sales 24.000 books Beginning inventory 0 books Average selling price $84 per book Variable production costs $52 per book Fixed production costs $432,000 per semester The fixed-cost allocation rate is based on expected sales and is therefore equal to 5432,000 - 24.000 books = $18 per book. Print Done
