QUESTION 2
There are three major inventories in manufacturing accounts;
 Direct materials
 Work in progress
 Finished
DIRECT MATERIALS
These are all the materials the company uses to make the product e.g
a car manufacturer using steel to make the body of the car.
These are generally the materials you can directly trace back to the
inventory.
Manufacturing companies use the perpetual inventory tracking
method to keep track of their direct material inventory.
At that point, the cost is moved to the work-in-process account.
WORK-IN-PROCESS INVENTORY
In the manufacturing process, the company probably has items that
are in the process of being made but aren’t yet complete, which is
considered work in process.
The company values its work-in-process inventory based on how far
each product has been processed.
FINISHED GOODS INVENTORY
Finally, the costs you associate with goods that are ready for sale to
customers, but have not been sold, are under as finished
goods inventory.
For the car manufacturer, this category consists of cars not yet sold to
individual dealerships.
Any finished goods that haven’t been matched with a customer are
part of the manufacturer’s inventory.