CHAP 15 Q12

Zhang Industries is a manufacturer of large commercial air conditioning units. Zhang has a lot of inventory on hand and is in the process of classifying its inventory. Zhang has a large stock of inventory that it purchased from a supplier who was discontinuing a product that Zhang uses to build its air conditioners.

How should this inventory be classified?

Raw materials

Finished goods

Work in process

Which type of inventory is least liquid?

Work in process

Raw materials

Finished goods