Mountain Press proauces textbooks for high school accounting courses. The company recently hired a new editor, Jan Green, to handle production and sales of books for an introductory accounting course. Jan's compensation depends on the gross margin associated with sales of this book. Jan needs to decide how many copies of the books to produce. The following information is available for the fall semester of 2017: Estimated sales 50,000 books O books $ 160 per book $ 100 per book $750,000 per semester The fixed-cost allocation rate is based on expected sales and is therefore equal to $750,000/50,000 books = $15 per book. Beginning inventory Average selling price Variable production costs Fixed production costs Jan has decided to produce either 50,000, 65,000, or 70,000 books.
Mountain Press proauces textbooks for high school accounting courses. The company recently hired a new editor, Jan Green, to handle production and sales of books for an introductory accounting course. Jan's compensation depends on the gross margin associated with sales of this book. Jan needs to decide how many copies of the books to produce. The following information is available for the fall semester of 2017: Estimated sales 50,000 books O books $ 160 per book $ 100 per book $750,000 per semester The fixed-cost allocation rate is based on expected sales and is therefore equal to $750,000/50,000 books = $15 per book. Beginning inventory Average selling price Variable production costs Fixed production costs Jan has decided to produce either 50,000, 65,000, or 70,000 books.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Calculate expected gross margin if Jan produces 50,000, 65,000, or 70,000 books. (Make sure you include the production-volume variance as part of cost of goods sold.)
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