Material / Inventory
Material: Material refers to the goods acquired from outside to support the manufacturer process in producing the final products for the end-user. Material is required to ensure smooth functioning of the production process and to meet the fluctuating demand for goods. While materials are considered assets, they become a part of the cost of the product when used in the production process. For wholesaler and retailers, the only stocks are finished goods that firms buy and resale. In cost accounting, material is defined as the part of inventory.
Inventory: An inventory is an ideal resource of any kind that has some economic value for the purpose of future affairs. There are various problems associated with maintaining inventory such as How much to buy, when to buy, for whom to buy.
Type of Materials
Raw Material: It is the most basic material that business requires in the process of production of the goods.
Spare Parts: It includes products which are complimentary to the main products produced for the purpose of sale.
Work-in-Process: It refers to those material which are in process of manufacturing i.e. the work done on them is partially completed.
Finished Goods: Finished goods refer to the final products obtained from the manufacturing process awaiting sale. The purpose of maintaining the inventory of finished goods to meet the demand of the customer so that there is no deficiency at the time when demand arises.
