The correct answer is: B. Work in-process inventory.
Work in process inventory is the cost of materials that have been partially processed into finished goods. It includes the cost of direct materials, direct labor, and manufacturing overhead that have been incurred to date on the products that are still in the production process.
Direct materials are the materials that can be physically traced to the finished product. For example, the wood used to make a table is a direct material.
Direct labor is the labor that can be directly traced to the finished product. For example, the labor of the carpenter who builds the table is a direct labor cost.
Manufacturing overhead is all of the other costs associated with the production of a product, but that cannot be directly traced to the finished product. For example, the cost of the factory building and the cost of the factory manager’s salary are manufacturing overhead costs.
Work in process inventory is an asset on the balance sheet. It is reported as a current asset because it is expected to be converted into cash within one year.
The other options are incorrect because:
- Direct material inventory is the cost of materials that have not yet been used in the production process.
- Finished goods inventory is the cost of products that have been completed and are ready for sale.
- Supplier inventory is the cost of materials that have been purchased from suppliers but have not yet been received.