Raw materials

Raw materials
A . 1 and 3 only
B . 2 and 4 only
C . 1 and 2 only
D . 3 and 4 only

View Answer

Answer: B

Explanation:

Raw materials are basic input materials – they are only processed limitedly or have not been processed at all. Their values are equal to acquisition cost and are the lowest value of stock held. Secondary components are the products that are combined with others to produce the finished goods. They are acquired in the processed state. Their value is higher than raw materials, but still at acquisition cost.

Work in progress is the stock part-way through manufacture that has not been finished. It is typically not completed yet, so it doesn’t have full value. But the costs of processing already carried out makes it more valuable than materials and components.

Finished goods are completed and ready to be used or sold. Finished goods are the most expensive and need to be stored in good conditions.

Reference: CIPS study guide page 82-83

LO 2, AC 2.1