Work in Process (WIP) Inventory

This video discusses Work-in-Process Inventory.

Manufacturers have three types of inventory: Raw Materials Inventory, Work-in-Process Inventory, and Finished Goods Inventory. Work-in-Process Inventory consists of partially-built units. An example would be a partially-constructed house for a home builder. Raw materials have been added and labor is being done, but the product is not yet finished and ready for sale.

Once the product is completed, the costs will be transferred from Work-in-Process Inventory to Finished Goods Inventory. When the product is ultimately sold, the costs in Finished Goods Inventory will be expensed through Cost of Goods Sold.
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