Inventories

Inventories are stated at the lower of cost or market value. In the United States, we manufacture certain finished products and parts inventories for drill bits, completion products, bulk materials, and other tools that are recorded using the last-in, first-out method, which totaled $160 million as of both June 30, 2012 and December 31, 2011. If the average cost method had been used, total inventories would have been $42 million higher than reported as of June 30, 2012 and $36 million higher than reported as of December 31, 2011. The cost of the remaining inventory was recorded on the average cost method. Inventories consisted of the following:



Millions of dollars	June 30, 2012		December 31, 2011
Finished products and parts	$	2,405	$	1,801
Raw materials and supplies	773		673
Work in process	119		96
Total	$	3,297	$	2,570

Finished products and parts are reported net of obsolescence reserves of $110 million as of June 30, 2012 and $108 million as of December 31, 2011.