If the projected sales for the upcoming year are 500,000 units, with a target ending finished goods inventory of 150,000 units and 60,000 equivalent units in ending work-in-process (WIP) inventory, while the beginning finished goods inventory is 80,000 units and beginning WIP inventory has 50,000 equivalent units, what is the total number of equivalent units that need to be produced?

Explanation

To calculate the equivalent units to produce, use the formula: Budgeted sales + Desired ending finished goods inventory + Equivalent units in ending WIP inventory – Beginning finished goods inventory – Equivalent units in beginning WIP inventory. Substituting the values: 500,000 + 150,000 + 60,000 – 80,000 – 50,000 = 580,000 units. Hence, the correct production quantity is 580,000 equivalent units.