Concept explainers
(Learning Objective 1) Which of the following types of companies would have work in process inventory?
- a. Service
- b. Merchandising
- c. Manufacturing
- d. All of the above
To-identify: The appropriate answer for the given statement.
Answer to Problem 1QC
Manufacturing companies would have work in process inventory.
Explanation of Solution
There are basically three types of companies:
- a. Service Companies
They deal in intangibles, so generally do not have inventories.
- b. Merchandising Companies
They resell tangible products that they buy from manufacturers and suppliers. The inventory carried on by these companies is generally finished goods inventory.
- c. Manufacturing Companies
They use labour, plant and equipment to convert raw materials into finished products. Due to which they carry three types of inventories:
- Raw materials inventory
- Work in process inventory
- Finished goods inventory
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