Budgeted sales for the next year is 5,00,000 units. Desired ending finished goods inventory is 1,50,000 units and equivalent units in ending W-I-P inventory is 60,000 units. The opening finished goods inventory for the next year is 80,000 units, with 50,000 equivalent units in beginning W-I-P inventory How many equivalent units should be produced?
Correct answer: A. 5,80,000
- A. 5,80,000
- B. 5,50,000
- C. 5,00,000
- D. 5,75,000
Explanation
Required production equals sales plus desired closing inventories minus opening inventories: 500,000 + 150,000 + 60,000 − 80,000 − 50,000 = 580,000 equivalent units. Both finished goods and work-in-process inventories must be included.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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