Raw materials, work-in-process inventory, and finished goods are collectively known as?

Raw materials, work-in-process inventory, and finished goods are collectively referred to as inventoriable costs because they represent the total costs of products that a company has in its production process at any given point in time. These costs are capitalized as inventory on the balance sheet until the goods are sold, at which point they become cost of goods sold on the income statement.

Inventoriable costs include all costs associated with acquiring or producing goods that are intended for sale. This encompasses not only the purchase price of the raw materials but also any direct labor costs related to manufacturing and overhead costs that are incurred in the production process. This categorization is essential for understanding how inventory affects a company’s financial statements and overall profitability.

The other options do not encompass the full range of inventory types. Operating costs typically refer to ongoing expenses that are necessary to maintain a business's operations and are not limited to just the manufacturing process. Fixed assets are long-term tangible assets utilized in the production of goods, like machinery and buildings, rather than inventory. Prime costs specifically refer to direct materials and direct labor directly tied to the production of goods but do not include the indirect costs that contribute to work-in-process and finished inventory. Thus, the classification of raw materials, work-in-process