Do you pay for WIP on completion?

Depends on the type of manufacturing business. In a high inventory turn environment WIP should be a smaller piece of the inventory balance. Finished goods and raw materials are a higher focus for valuation. I look at the entire balance of inventory from an obsolesce perspective. I also check to make sure they aren't over capitalizing labor or OH into the balance. Check trends over time.

Paying for WIP seems reasonable at face value. I can think of two red flags. One is that production operations can sometimes run large lots to gain efficiency but at the cost of low turns and later obsolescence. So check the turns of WIP by item and don't pay for anything turning less that 4 times a year.. Check projections as well as history in case a parent product has been discontinued. The other possible red flag is if the labor is marked up too high in the capitalization. Usually labor is multiplied by an absorption ratio to capitalize manufacturing overhead. Ask to see this calculation to make sure it's reasonable.