Chapter 3 ACCT 2

Finished Goods

Consists of completed units of products that have not yet been sold to customers. As jobs are sold, their costs are transferred from Finished Goods to Cost of Goods Sold.

Work in Process

Consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer. When Jobs are completed, their costs are transferred from Work in Process to Finished Goods inventory.

Raw materials

Include any materials that go into the final product. When raw materials are used in production as direct materials, their costs are transferred to Work in Process inventory.

Cost of Goods Manufactured

The amount transferred from Work in Process to Finished Goods.

Underapplied Overhead

When the overhead cost applied is less than the actual overhead costs of a period.

Overapplied Overhead

When the overhead cost applied is more than the actual overhead costs of a period.