In a manufacturing company, what is Work in Process (WIP) inventory generally described as?

• A. Costs incurred for selling and administrative activities that are expensed as incurred
• B. The cost of products that are partially completed but not yet finished and transferred to Finished Goods inventory
• C. The cost of products that have been completed and are ready for sale to customers
• D. The cost of goods that have been purchased and are held for resale in the normal course of business

Answer: (B)

Verified step by step guidance

1. Understand that Work in Process (WIP) inventory refers to products that are in the production process but are not yet complete.
2. Recognize that WIP includes all costs incurred on these partially completed products, such as raw materials, direct labor, and manufacturing overhead applied up to that point.
3. Differentiate WIP from Finished Goods inventory, which consists of products that are fully completed and ready for sale.
4. Also distinguish WIP from raw materials inventory (materials purchased but not yet used) and from selling and administrative costs, which are period expenses and not part of inventory.
5. Conclude that WIP inventory is best described as the cost of products that are partially completed but not yet finished and transferred to Finished Goods inventory.