Finished goods are items that are completely manufactured or processed and are ready to be sold to customers. This is a category of inventory that is used to describe goods in storage. The term applies to goods that you have manufactured or processed to add value. Items that are purchased for resale are known as merchandise. The following are illustrative examples of finished goods.
MaterialsA deconstruction company refurbishes wood and packages it for shipping. The wood is considered a finished good when packaging is complete. When it is loaded into a truck it is considered goods in transit.
ComponentsAn industrial products company produces parts for aircraft. Customers often place urgent orders that are required immediately. The firm manufactures thousands of different parts in small production runs and stocks them in inventory until a customer order is received. This allows the firm to reduce order turnaround time but results in a large inventory of finished goods.
ProductsAn electronics company manufacturers cameras in small runs based on sales forecasts. Every effort is made to minimize inventory because cameras are frequently improved and old models quickly lose value. As such, the firm's inventory of finished goods is small with an average inventory age of less than 3 days.
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