3 Types of Inventory (Raw Materials, WIP, and Finished Goods)

00:05:09
https://www.youtube.com/watch?v=rM-REiRdORg

概要

TLDRThis video discusses the types of inventory specific to manufacturing firms, contrasting them with merchandising firms. It introduces three categories: raw materials, work in process (WIP), and finished goods. Raw materials are the base materials needed for production. WIP refers to products that are partially assembled but not yet finished. Finished goods are complete products ready for sale. The video exemplifies these concepts in the context of car production, demonstrating how to categorize and calculate total inventory from these components.

収穫

  • 📦 Understanding inventory categories is crucial for manufacturing firms.
  • 🛠️ Raw materials are the base materials like steel used in production.
  • 🔄 Work in process (WIP) refers to partially assembled products.
  • ✅ Finished goods are ready-to-sell products.
  • 📊 Total inventory is the sum of raw materials, WIP, and finished goods.
  • 💡 Manufacturing inventory differs from merchandising inventory.
  • 📝 It’s essential to account for inventory on balance sheets.
  • 💲 The balance sheet may itemize different inventory types.
  • 🚗 Example provided: Tommy's car production.
  • 🔑 Key equation: Raw materials + WIP + Finished goods = Total inventory.

タイムライン

  • 00:00:00 - 00:05:09

    The video discusses different types of inventory specific to manufacturing firms, highlighting the distinctions between manufacturing and merchandising firms. It categorizes inventory into three primary subcategories: raw materials, work in process (WIP), and finished goods. The explanation emphasizes that raw materials are the basic materials (like steel for cars) used to produce a product, while WIP denotes items that have undergone some processing but are not yet complete. Finally, finished goods are fully assembled products ready for sale. The video outlines the flow of inventory stages from raw materials to finished goods and provides a hypothetical balance sheet example illustrating the values of each category of inventory, reinforcing the principle that total inventory equals the sum of raw materials, WIP, and finished goods.

マインドマップ

ビデオQ&A

  • What are the three types of inventory in manufacturing?

    The three types of inventory in manufacturing are raw materials, work in process (WIP), and finished goods.

  • How do raw materials differ from work in process?

    Raw materials are the basic materials used in production, while work in process refers to items that have started production but are not yet complete.

  • What are finished goods?

    Finished goods are completed products that are ready to be sold.

  • How is total inventory calculated?

    Total inventory is calculated by adding raw materials, work in process, and finished goods.

  • Can manufacturing firms break out their inventory on balance sheets?

    Yes, manufacturing firms can break out their inventory into categories like raw materials, WIP, and finished goods on their balance sheets.

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  • 00:00:00
    in this video we're going to talk about
  • 00:00:01
    the different types of inventory uh for
  • 00:00:04
    a manufacturing firm and it's important
  • 00:00:06
    to specify
  • 00:00:08
    manufacturing uh firm because a
  • 00:00:11
    merchandising firm just buys inventory
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    and then sells inventory the inventory
  • 00:00:15
    that giv already put together but a
  • 00:00:17
    manufacturing firm uh we're going to
  • 00:00:19
    have some nuances here that that is what
  • 00:00:21
    we're going to talk about so first of
  • 00:00:23
    all we've already kind of talked about
  • 00:00:25
    things like uh direct materials direct
  • 00:00:28
    labor and manufacturing overhead and how
  • 00:00:31
    these costs these costs go into
  • 00:00:36
    inventory and then they flow out of the
  • 00:00:38
    firm through cost of goods sold right so
  • 00:00:42
    what we're looking at specifically here
  • 00:00:45
    is this inventory component and what we
  • 00:00:48
    find is that there's actually there's
  • 00:00:50
    actually kind of subcategories of this
  • 00:00:52
    so we've got we've got raw materials
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    which I'll just put as RM right now
  • 00:00:57
    we've got work in process which is whip
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    and then we've got finished goods and in
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    the rest of this video I'm going to
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    explain each of these in more detail so
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    let me just scroll down a little bit
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    here so so let's talk about uh raw
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    materials and I'll just just abbreviate
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    this so raw materials we're talking
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    about uh let's say that you were making
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    a car it would be something like steel
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    right this this is the actual materials
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    used to make the product right so this
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    is uh but now when we think about when
  • 00:01:30
    we think about this this whip component
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    right now we've got the work in process
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    now how is this different how does this
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    differ from from the raw materials well
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    now we've done some work uh to the steel
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    or whatever the raw materials are uh we
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    we've done some work to it but it's in
  • 00:01:49
    process that means it's not finished yet
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    right so so we go ahead we we purchase
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    uh some materials uh and then we apply
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    some labor some overhead whatever what
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    whatever we do to the product we start
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    doing it uh but it's not complete and so
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    we can't just say anymore well it's it's
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    raw materials it's just sitting there
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    we've actually done some work but it's
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    in process it basically means it's
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    incomplete uh so this is
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    incomplete it's like a partially
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    assembled uh unit okay so it's it's a
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    it's a bicycle that's half complete we
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    haven't put it together yet uh but then
  • 00:02:25
    once we actually complete it that's
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    where we get into the the finished goods
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    uh part of so
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    finished goods now this is this is the
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    complete uh bicycle this is this is an
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    actual unit that's ready to be
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    sold unit ready to be sold so let's
  • 00:02:47
    let's take the bicycle thing for a
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    moment here so so let's say it's a steel
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    bicycle our raw material we start with
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    is steel then we do some work to it we
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    start assembling it but but the bicycle
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    is not complete it's incomplete it's
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    just sitting there half done and then
  • 00:03:01
    when we finish it uh it goes into to
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    finish good so things go raw materials
  • 00:03:06
    to work in process to to finish
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    goods and so the these are all different
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    types of inventory so if we looked at a
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    manufacturing firm's uh balance
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    sheet right if we looked at the balance
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    sheet let me let me give an example
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    let's say we had an said we had uh some
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    Auto production let's say we have
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    tomies Tomy uh Tommy's Car
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    production so when we look at the
  • 00:03:34
    balance sheet we might see something
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    like this we might see
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    inventory not all firms will break it
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    out like this but if it this inventory
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    and then we've got raw
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    materials and let's say that we have raw
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    materials of of
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    40,000 and then we've got whip so this
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    is work in process incomplete partially
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    assembled unit and that's
  • 00:04:01
    35,000 and then we've got finished goods
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    just abbreviate there and that's
  • 00:04:08
    50,000 now what do we have here total
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    looks like we have
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    125,000 so what does that mean that
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    means that our actual asset our actual
  • 00:04:18
    total inventory so let just put here
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    total
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    inventory is
  • 00:04:27
    125,000 but we can break that out
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    out as follows and say we've got 40,000
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    in raw materials 35,000 and partially
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    assembled unfinished units we've done
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    work to them but they're not done yet
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    and then we've got
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    $50,000 of inventory that is ready it's
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    good to go it's ready to be sold and go
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    out the door so just remember this this
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    this really simple basic equation is
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    that raw
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    materials plus
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    whip Plus finished goods if we add all
  • 00:05:02
    those together that's going to give us
  • 00:05:05
    total
  • 00:05:07
    inventory
タグ
  • inventory
  • manufacturing
  • raw materials
  • work in process
  • finished goods
  • balance sheet
  • car production
  • cost of goods sold
  • business
  • economics