Finished goods facts for kids
Finished goods are products that have been completely made and are ready to be sold or used. Think of them as the final result of a building process. For example, a new car, a computer, or even a spare part that's ready to be installed are all finished goods. They have gone through all the necessary steps in a factory and are now complete.
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How Products Are Made: The Journey
When companies make things, they usually go through three main stages. These stages help keep track of everything from the very beginning to the end.
Stage 1: Raw Materials
This is where everything starts! Raw materials are the basic ingredients or parts that a company buys to make a product. They haven't been changed much yet.
- For a wooden chair, the raw material might be wood planks, screws, and glue.
- For a T-shirt, the raw material would be cotton fabric and thread.
These materials are the building blocks for whatever is being created.
Stage 2: Work in Process
After raw materials, comes work in process (sometimes called WIP). This refers to products that are currently being made but are not yet finished. They are somewhere in the middle of the manufacturing journey.
- Imagine the wooden chair again. When the wood planks are cut and shaped, but not yet assembled, they are work in process.
- For the T-shirt, if the fabric has been cut and sewn into pieces but not yet fully stitched together, it's work in process.
These items are still on the factory floor, waiting for more steps to be completed.
Stage 3: Finished Goods
Finally, we have finished goods. These are the products that have completed all their manufacturing steps. They are fully assembled, tested, and ready to leave the factory. They are either waiting to be shipped to stores or directly to customers.
- The fully assembled and painted wooden chair is a finished good.
- The T-shirt, completely sewn, tagged, and folded, is a finished good.
These products are ready for their final purpose, whether it's being sold in a shop or used by someone.
When Finished Goods Become Raw Materials
Sometimes, what is a finished good for one company can become a raw material for another. This might sound a bit confusing, but it happens all the time!
- Think about a company that makes paper. For them, the rolls of paper they produce are finished goods.
- Now, imagine a book publisher. When they buy those rolls of paper from the paper company, the paper becomes their raw material. They will use it to print books.
So, the term "finished good" depends on who is using the product and what they are doing with it. It's all about the next step in the supply chain.
Other examples of finished goods include:
- Cars, ready to be driven off the lot.
- Clocks, fully assembled and ticking.
- Pianos, tuned and ready to play music.
