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Inventory Classifications
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Inventory is
idle resources that have future economic value. It
indicates that it may be available in different forms
depending upon the production cycle stage it is in.
Classification of inventory is done on this basis and thus
the different classifications of inventory are as follows:
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Raw materials - Raw materials are input goods
intended for combination and/or conversion
through the manufacturing process into semi-finished
or finished goods. They change their form and become
part of the finished product.
Components and Parts - Just as raw
materials are converted to finished goods in a
manufacturing operation, components and parts are
assembled into finished goods in an assembly
operation.
Maintenance, repair and operating |
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inventories (MRO)
- These include parts, supplies, and materials used
in or consumed by routine maintenance and repair of operating
equipment, or in support of operations.
In-process goods -
These are goods in the process of manufacturing and only
partially completed. They are usually measured for accounting
purposes in between significant conversion
phases.
In-process inventories provide the flexibility necessary to deal
with variations in demand |
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between
different phases of manufacturing.
Finished goods - These represent the completed
conversion of raw materials into the final
product. They are goods ready for sale and shipment.
Resale goods - These are goods acquired for
resale. Such goods may be purchased by a
wholesaler for resale to distributors, or by
distributors for resale to consumers, etc.
Capital goods -
These are items (such as equipment) that are not used up or
consumed during a single operating
period, but have extended useful lives and must be |
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expensed
over multiple operating periods. Tax laws require that
such an item be capitalized, and a predetermined
percentage of its cost be recognized as an expense each
operating period, over a predetermined time frame,
according to equipment classes.
Construction materials
- These are raw materials
and components for construction projects such
as a building, bridge, etc.
Hard goods/soft goods - What one identifies as
hard goods and soft goods will vary depending
on the industry involved. For example, in data
processing, hard goods include apparatus such as
computers and terminals, while soft goods include
software, data storage media, and the like. |
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