What is work in process inventory?
Work in process inventory (WIP) counts every item that has left the raw materials stage but has not yet become a finished good, sitting in the middle of your production flow. It includes the materials, labor, and overhead already invested in units still on the factory floor. That makes it two things at once: a reportable asset on your books and a read on how smoothly production is running.
Key characteristics
- Sits mid-production: WIP is partially completed goods that have left raw materials but are not yet finished and ready to sell.
- Carries accumulated cost: It rolls up direct materials, direct labor, and manufacturing overhead already applied, which is easier to track when you build bills of materials (BOMs) that list every part.
- Counts as a current asset: It shows up on the balance sheet, but it is hard to resell in its half-built state. The scale is real: U.S. manufacturers held about $272 billion in work-in-process inventories as of June 2026, per the U.S. Census Bureau’s Manufacturers’ Shipments, Inventories, and Orders survey.
- Measured with a formula: Ending WIP = Beginning WIP + Manufacturing costs − Cost of goods manufactured (COGM).
- Signals efficiency: Too much WIP can flag a bottleneck; too little can flag a slowdown. Slow-moving stock ties up cash, and average inventory turns fell to 6.3 in 2025, down from 8.2 in 2023 (Supply Chain Management Review 2025 Warehouse/DC Operations Survey).
Example
Say a custom desk lamp maker starts the quarter with $8,000 in work in process. It adds $40,000 in manufacturing costs during the quarter and records $45,000 in cost of goods manufactured. Ending WIP = $8,000 + $40,000 − $45,000 = $3,000.
Those numbers stay honest only when the shop tracks each unit as it moves. Work orders push items through the exact stages WIP measures, so clean manufacture and work orders keep your ending figure accurate.
This is where good software earns its keep. Prince Michel Vineyard & Winery used Fishbowl Manufacturing to cut cost-to-manufacture calculations from six months after year-end to immediately upon manufacture, improving accuracy by more than 10%. The stakes are broad, too: across the global retail supply chain, inventory distortion reached $1.7 trillion in 2026 (IHL Group 2026 Inventory Distortion Study).
Related terms
- raw materials inventory
- finished goods inventory
- cost of goods sold
- manufacturing inventory management
- inventory valuation methods
FAQ
Is work in process the same as work in progress?
They overlap. Manufacturing usually uses “work in process” for short production cycles, while “work in progress” is more common for longer projects like construction.
Is work in process inventory an asset?
Yes. It is a current asset on the balance sheet, though it usually cannot be sold until it becomes a finished good.
How do you calculate ending work in process inventory?
Ending WIP = Beginning WIP inventory + Manufacturing costs − Cost of goods manufactured (COGM).