Question

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: i (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 26,500 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 19.000 books, then 26,600 books, and lastly 28,500 books. (Enter a '0" for any zero balance accounts. If an account does not have a variance, do not select a label.) 19,000 books 26,600 books 28,500 books i More Info - X Revenues Cost of goods sold 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 $ 82 per book Variable production costs $ 47 per book Fixed production costs $475,000 per semester The fixed-cost allocation rate is based on expected sales and is therefore equal to $475,000/19.000 books = $25 per book. 19,000 books books 26,600 books books 28,500 books books Beginning inventory Production Sales Ending inventory oks Print Cost per book Cost of ending inventory

Answer 1

As Given	Figures	Index
Selling Price (in $)	82	A
Variable Cost (in $)	47	B
Fixed Cost (in $)	25	C
Estimated Unit Sales	19,000	D
Charge on Inventory	5%	D1

Requirement 1

			Units
Index	Particulars	Formula	19,000	26,600	28,500
E	Revenues (in $)	Units X (A)	15,58,000.00	21,81,200.00	23,37,000.00
F	Cost of Goods Sold (in $)	Units X (B+C)	13,68,000.00	19,15,200.00	20,52,000.00
G	Production of Volume Variance* (in $)	(Units - D) X C	0.00	-1,90,000.00	-2,37,500.00
H	Net cost of goods sold (in $)	F-G	13,68,000.00	17,25,200.00	18,14,500.00
I	Gross Margin (in $)	E-H	1,90,000.00	4,56,000.00	5,22,500.00

* Production Volume Variance - It is given that the Fixed cost is per semester and is allocated based on estimated sales. While calculating the Cost of Goods Sold (F), unit rate of fixed cost is used for all the three level of unit productions. However, the fixed cost will not increase throughout the semester. Hence the difference is calculated as volume variance.

Requirement 2

			Units
Index	Particulars	Formula	19,000	26,600	28,500
	Beginning Inventory (in Units)	As Given	0.00	0.00	0.00
	Production (in Units)	As Given	19,000.00	26,600.00	28,500.00
	Sales (in Units)	D	19,000.00	19,000.00	19,000.00
J	Ending Inventory (in Units)	Units - D	0.00	7,600.00	9,500.00
K	Cost per book (in $)	H / Units	72.00	64.86	63.67
L	Cost of ending inventory (in $)	J * K	0.00	4,92,914.29	6,04,833.33

Requirement 3

			Units
Index	Particulars	Formula	19,000	26,600	28,500
	Gross Margin	I	1,90,000.00	4,56,000.00	5,22,500.00
M	Ending Inventory charge	I X D1	-	24,645.71	30,241.67
N	Adjusted Gross Margin	I - M	1,90,000.00	4,31,354.29	4,92,258.33
	Excess Production	(Units - D) / D	0%	40%	50%

For the below two requirements, the question is not so clear and the drop down list is not visible to be answered for:

Do you think the metric would accomplish the cbjective 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 V mitigate the increase in inventory associated with excess production. Therefore, it may be from the organization's standpoint.

A ratio of ending inventory to beginning inventory is The non-financial measures