Final answer:
To estimate production requirements, you add projected sales to desired ending inventory and subtract beginning inventory. This calculation is crucial for planning how much inventory to produce on top of ensuring sufficient stocks for projected sales.
Step-by-step explanation:
In order to estimate production requirements, the correct approach would be to add projected sales in units to desired ending inventory and then subtract beginning inventory. This method allows a company to determine how much inventory they should produce to meet expected sales while also having enough left over for the desired ending inventory. The calculation is a fundamental part of inventory management and production planning.
To illustrate, if a company projects that they will sell 100 units in the upcoming period, wants to have 50 units left as ending inventory, and they currently have 20 units as beginning inventory, the production requirements would be computed as follows: 100 units (projected sales) + 50 units (desired ending inventory) - 20 units (beginning inventory) = 130 units to produce.
A related concept in the context of economics and business includes understanding how total revenue, marginal revenue, total cost, marginal cost, and average cost are calculated. For instance, marginal cost is computed by dividing the change in total cost by the change in quantity, while average cost is determined by dividing total cost by quantity.