Question

Explain the following inventory account and provide a real life example from three (3) different manufacturing companies: work-in-process inventory. (200 Words)

Answer 1

(Exactly 200 words)

Work in progress (WIP) is a form of inventory, usually unfinished goods which still require further work, processing, assembly and or inspection. This type of inventory is usually found within steps or sub-processes of a production process. Only raw materials which have commenced to move through their value adding processes can be classified as WIP. Raw materials which have still not been worked with are still classified as raw materials. WIP typically includes Raw material cost, Direct labour and Manufacturing overhead costs.

Examples:

A . Tech7 Automation Company:

Tech7 automation is a private company that manufactures customized power generators.Tech7 manufactures a base unit structure with common conductors. These units are held as WIP. Each such units are then worked upon by engineers as per customer requirements. These units become final inventory only when all customer specific parts are fixed.

B. Lenshub:

Lenshub is private company that manufactures eyeglasses. Lenshub manufactures zero power plastic lenses in batches. These are held as WIP. They only become final inventory when fixed to respective frames.

C. Motor Company:

Motor Company is a motorbike engine manufacturer. Carburettor are manufactured in-house, which is then fed to assembly workstation. Carburettors remain WIP until assembled into engine.