Finished goods are a part of the manufacturing process. When it comes to manufacturing there are three categories of inventory:
- Raw Materials
- Work in progress
- Finished Goods (Or Final Products)
The products that don’t require any more modification, are called finished goods. Those are also the products that are sold to the customers. Sometimes they might also be referred to as raw materials. When dealing with B2B products, what one company perceives as final products, the other might see as raw materials. For example, sugar goes through a long process to become granulated. The company that completes this process, marks sugar as final product. After that, the company sells the sugar to many different businesses. One of those businesses could be a bakery that buys the sugar from the manufacturer and perceives it as raw material. Once the bakery uses the sugar and creates cakes and other pastries, then those are as marked as final products.
Examples of Final Products
- In the manufacturing process of a bicycle, the raw materials are products like screws, chains and metal rods. Materials that are categorized as work in progress are parts of the bicycle like wheels and the seat. The finished goods are the completed bicycles.
- When a bakery makes cakes and other pastries, the raw materials are sugar, flour, milk, butter etc. The bases of the cakes, frosting, and fillings are part of the work-in-progress materials. At last, the final products are the cakes when decorated and ready to be sold to customers.
- A factory that manufactures and sells mugs in bulk, perceives the completed mugs as final products. On the other hand, the company that purchases the mugs in order to customize them sees the mugs as raw materials. Once the customizing process is done, then the mugs with the logos will be perceived as finished goods.
