Work in Process(redirected from Goods in Process Inventory)
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Work in Process
the value possessed by output at various stages of the production process, from actual start-up to completion of the finished product, its acceptance by the quality control division, and its inclusion in market inventory.
Work in process constitutes part of the working funds of a production enterprise or association. It includes the value of the materials and fuel that are being processed or assembled and do not yet represent finished products. Work in process makes up a significant share of the total working funds of production enterprises and associations; with technological progress, this proportion is growing. For the USSR national economy as a whole, work in process made up 15.1 percent of working capital in 1972; for industry this figure was 20.7 percent.
The amount of work in process depends on the length of the production process, the level of daily production expenditures, and the pattern of these expenditures’ growth; thus figures may differ substantially for different economic sectors. In material-intensive and labor-intensive branches of industry, where production cycles are long, the proportion of work in process is much higher. In the machine-building and metalworking industries in the USSR in 1972, for example, work in process constituted 36.9 percent of working funds; this figure was just 0.3 percent for the electric power sector during the same year.
The establishment of norms for levels of work in process is of major importance for enterprises. Overstating the level of work in process leads to a retarded rate of turnover of working funds, while understating these levels relative to actual production requirements prevents creation of the necessary reserve stocks and thus disrupts the pace of production. Improving the organization of production and shortening production time represent decisive factors in reducing the level of work in process and improving the indexes of enterprise performance.
A. A. LEBEDEV