Revenues less the cost of goods sold is equal to gross profit. Gross profit less the selling and administrative expenses is equal to the income from operations. b. Determine the inventory balances at the end of the first month of operations. Materials inventory Work in process inventory 78,700 X $ Finished goods inventory Feedback Check My Work The materials inventory, sometimes called raw materials inventory, consists of the costs of the direct and indirect materials that have not yet entered the manufacturing process. The work-in-process inventory consists of direct materials costs, direct labor costs, and factory overhead costs that have entered the manufacturing process but are associated with products that have not been completed. The finished goods inventory consists of completed jobs that have not been sold.