The lot production costs are higher than the inventory costs of the finished goods.

When the perpetual cost method is used for finished goods, the WIP clearing run will post a loss from production differences. This loss is a result of the cost of the finished goods being higher than the cost of the raw materials used to produce them. The difference between the two costs is posted to the production differences account as a loss. The WIP clearing run also adjusts the inventory accounts for the raw materials used in production and the finished goods inventory.