Types of Inventory
Inventories can be classified in several ways. In this section we discuss accounting inventories and operational inventories.
Accounting Inventories
Inventory exists in three aggregate categories that are useful for accounting purposes. Raw materials (RM) are the inventories needed for the production of services or goods. They are considered to be inputs to the transformation processes of the firm. Work-in-process (WIP) consists of items, such as components or assemblies, needed to produce a final product in manufacturing. WIP is also present in some service operations, such as repair shops, restaurants, check-processing centers, and package delivery services. Finished goods (FG) in manufacturing plants, warehouses, and retail ...
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