Work in process: Difference between revisions

Revision as of 20:28, 13 July 2022

Revision as of 23:29, 13 July 2022

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WIP inventory refers to goods that are in production and not yet a finished good.<ref>{{Cite web |title=What Work-in-Progress Really Means |url=https://www.investopedia.com/terms/w/workinprogress.asp |access-date=2022-07-13 |website=Investopedia |language=en}}</ref> On the balance sheet, WIP inventory is aggregated into the inventory line under current assets along with raw materials and finished goods.<ref>{{Cite web |last=Institute |first=Corporate Finance |title=Inventory |url=https://corporatefinanceinstitute.com/resources/knowledge/accounting/inventory/ |access-date=2022-07-13 |website=Corporate Finance Institute |language=en-US}}</ref>

To calculate WIP inventory at the end of an accounting period, the following 3 figures are required: beginning WIP inventory, production costs, and finished goods. Beginning WIP inventory is the WIP inventory figure from the previous accounting period. Production costs includes all costs associated with manufacturing a product, such as raw materials, labor, and overhead costs. Finished goods is the total value of goods ready for sale in the current accounting period. The formula for calculating WIP inventory is as follows: Beginningbeginning WIP inventory + production costs – finished goods.<ref name=":0" />

== WIP inventory in supply chain management ==