What is Work in Process Inventory and How-to Calculate WIP
WIP calculations provide a basis for measuring the performance of the production department. Key performance indicators (KPIs) related to production efficiency, cost per unit, and throughput can be derived from WIP data. Clear insights into your WIP levels and production cycle times allow for more reliable forecasts and production plans. It also aids in quality control, enabling early detection of issues and enhancing product standards. Consequently, the cost of goods manufactured will be exaggerated and will directly impact your bottom line. These materials are straightforward to quantify and directly impact WIP valuation as they are requisitioned for production. High levels of WIP inventory also imply that you have many costs …
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