Inventory The breakdown of inventory cost is as follows Raw Materials Work in progress Finished goods 2019 7000 1250 16750 25,000 2018 3000 0 4000 7000 Raw material inventory recorded at cost at the time of purchase, consist of supplies such as nails, paint and junk that ABC collects. Many items were purchased at yard sales for a nominal amount. All materials on hand at December 31, 2019 are expected to be used in production for 2020. Work in progress is not significant at year end. Each year, ABC ceases its refurbishing around December 15 and does not start up again until January 1 to give employees a well-deserved rest. It is an unwritten rule that most jobs in progress in December must be completed before the production shutdown starts. This ensures the showroom is fully stocked for the holidays. The showroom is open up to and including December 24. The retail store then closes until January 2 of the following year. As expected, ABC almost sold out by closing time on December 24, 2019. Of the items remaining in finished goods inventory, $10,000 of the $16,750 was for a custom order from a local theatre company that was moving to a new location during the holidays and requested ABC hold the items until the move was complete. Barb is unsure whether it was too early to recognize revenue, and therefore left it in finished goods inventory, but needs advice. The theatre has agreed to pay the $20,000 agreed upon price by mid-January, when it picks the items up. The items were set aside and labelled "Theatre" Finished goods inventory includes costs of direct materials, direct labour and a portion of overhead costs. Direct labour is applied based on the time cards used to record time spent on each item. Each item is tracked individually because every item is considered unique. The costs accumulated in finished goods inventory account are expensed as cost of goods sold at the time inventory items are sold. Cost of goods sold is reported as $318,250 on the draft 2019 income statement