Academia Press produces textbooks for college courses. The company recently hired a new editor, Morgan White, to handle production and sales of books for an introduction to accounting course. Morgan's compensation depends on the gross margin associated with sales of this book. Morgan needs to decide how many copies of the book to produce. The following information is available for the fall semester 2013: i (Click the icon to view the information.) Morgan has decided to produce either 16,000, 20,000, or 24,800 books. Read the requirements. Requirement 1. Calculate expected gross margin if Morgan produces 16,000, 20,000, or 24,800 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 16,000 books, then 20,000 books, and lastly 24,800 books. (Enter a "0" for any zero balance accounts. If an account does not have a variance, do not select a label.) 16,000 books 0 More Info - X Requirements Estimated sales Beginning inventory Average selling price $ Variable production costs $ 16,000 books O books 75 per book 45 per book 1. Calculate expected gross margin if Morgan produces 16,000, 20,000, or 24,800 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. 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. per Fixed production costs $ 304,000 semester The fixed cost allocation rate is based on expected sales and is therefore equal to $304,000/16,000 books = $19 per book