Amy has a master's degree in secondary education and has taught math at a public charter high school.
What Are Finished Goods?
Think back to the last time you went to a store and went shopping. What did you see on the store shelves? If you went to the grocery store, you saw all kinds of fruits and vegetables, meats, and a whole lot of processed food items. If you went to a department store, you saw lots of clothes, shoes, games, electronics, and a whole bunch of other stuff. What do all these things have in common?
They're all called finished goods; these are goods or products that do not require any further processing and are ready to be sold. So, the items you see when you go shopping are finished goods. You know that when you purchase the item, it will do what you expect it to do. This is because the makers of the product are done working on it. There is no more processing that needs to be completed or changes that need to be made to the product.
A finished good is ready for sale; however, it hasn't been sold yet. After a product has been sold, it's considered merchandise. This means that once you have decided to purchase a finished good at the store and you have checked out with it, it's no longer called a finished good. You've bought it, and now it is merchandise.
The reason for this technicality is for accounting purposes. By differentiating between finished goods that haven't sold and between merchandise, businesses can determine how much inventory they have remaining versus how much profit they've made from selling the product.
Your food products are finished goods. You have processed foods and unprocessed foods, but both can be finished goods.
Your unprocessed foods are done growing and have been prepped for sale. Fruits and vegetables have been picked and cleaned and are ready for you to eat or cook. The same goes with your meats. Your meat has been cut and packaged so it's ready to be used. Your eggs have been gathered, cleaned, and packaged in cartons. You know that when you purchase these food items, the seller or farmer has done all the processing needed to make it ready to be sold. Your unprocessed foods, however, have gone through little or no changes before being considered ready to sell.
When a food is processed you end up with other types of finished goods such as cereals, canned tuna ready to be eaten, chips, salsa, soda, and many other items that you find in the aisles of your grocery store.
Restaurants also sell processed foods, which can be defined simply as food that's been changed from its natural state. For example, if a food is cooked, frozen, or has had ingredients or nutrients added, then it is processed. And when finished being processed, it is a finished good.
Finished goods also include products than can be considered durable or non-durable goods:
Durable goods are products that last a while. Typically these items are expected to last at least three years. These include things such as heavy machinery, furniture, cars, and jewelry. Your kitchen appliances are also examples of durable goods. The house that you live in is another one, and when they are ready to be sold they are finished goods.
Non-durable goods are products that wear out after a while or will be used up in a short amount of time. Actually, your finished food products are all considered non-durable goods. The medicine you use is a non-durable good. Your clothes and shoes are also finished non-durable goods. The gasoline that powers your car is another example of a non-durable good that, when ready to be sold, is a finished good.
The next time you are out shopping look around, most everything you see is a finished good.
All right, let's take a moment or two to review. As we learned, finished goods are goods or products that do not require any further processing and are ready to be sold, with unprocessed foods being foods done growing and have been prepped for sale, and processed foods being food that's been changed from its natural state. These may be processed or unprocessed foods and durable goods, which are goods that last a while, or non-durable goods, which are products that wear out after a while or will be used up in a short amount of time, that consumers buy and use every day.
Examples of finished goods include:
- Fruits and vegetables
- Processed foods such as cereal and sardines
It's important to also note that finished goods aren't considered merchandise, which is a good that's been sold.
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