## Answer

## General guidance

Production budget: It can be referred as the financial plan generally used by the producers or manufacturers of the product to make an estimation of how many products they are willing to produce and how much will be the estimated cost of the production of these units.

This enables the business organizations to keep a track on the cost incurred by them on the manufacturing of the product.

Sales: Sale of any goods or services can be made on a cash or credit basis. The amount receivable on sale can either be received immediately in cash or such a payment can be received at some future date. In case of sale is being made on a credit basis the company maintains an account of such customer in its books as Debtor or Accounts Receivable.

Beginning inventory: It can be said as a value of inventory business has at hand at the beginning of the accounting period. It is equal to the value of ending inventory of the last accounting period.

Ending inventory: It can be said as a value of inventory business has at hand in the ending of the accounting period. It is equal to the value of beginning inventory of the next accounting period.

Desired end inventory: It can be said as the value of ending inventory which the business is expecting as per the production budget. If desired inventory is more than actual inventory then it can be said that level of inventory is in a favorable position and if desired inventory is less than actual inventory then it can be said that level of inventory is in an adverse position.

## Step-by-step

### Step 1 of 2

To compute number of units produced it is required to add unit sales and desired inventory. Thus, this option is incorrect.

To compute number of units produced it is required to add unit sales and desired inventory and deduct beginning inventory. Thus, this option is incorrect.

To compute number of units produced it is required to subtract beginning inventory from unit sales. Thus, this option is incorrect.

Number of units produced would include desired ending inventory as to have a certain unit of inventory at the end it is required to be produced and not being sold. Therefore, it should be added in number of units sold to compute the number of units produced.

A number of units produced would never include beginning inventory as beginning inventory in the ending inventory of the last period. This means it was produced in the last accounting period.

Therefore, it should be subtracted from number of units sold. Moreover, number of units produced would include desired ending inventory as to have a certain unit of inventory at the end it is required to be produced and not being sold. Therefore, it should be added in number of units sold to compute the number of units produced.

Number of units produced would never include beginning inventory as beginning inventory in the ending inventory of the last period. This means it was produced in the last accounting period. Therefore, it should be subtracted from number of units sold.

### Step 2 of 2

To compute number of units produced it is required to add unit sales and desired inventory and deduct beginning inventory. Thus, this option is correct.

**Number of units produced can be computed by deducting beginning inventory from unit sales and adding desired inventory.**

Number of units produced would never include beginning inventory as beginning inventory in the ending inventory of the last period. This means it was produced in the last accounting period. Also, unit sales would include beginning inventory as it would be sold first. Therefore, to compute number of units produced it is required to subtract beginning inventory from unit sold.

Also, the desired ending inventory would be added as too have a certain unit of inventory at the end it is required to be produced and not being sold. Therefore, the correct way to compute number of units produced is to subtract beginning inventory from units sales and add desired inventory.

### Answer

**Number of units produced can be computed by deducting beginning inventory from unit sales and adding desired inventory.**

### Answer only

**Number of units produced can be computed by deducting beginning inventory from unit sales and adding desired inventory.**

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