Note 8. Inventories

Inventories consist of the following:


	June 30,			December 31,
	2011			2010
	(Dollars in millions)
Average or actual cost (which approximates current costs):
Finished products	$	223.3		$	224.4
In-process		2,123.5			1,866.1
Raw materials and supplies		760.7			692.8

		3,107.5			2,783.3
Less:
Reserve to reduce certain inventories to LIFO basis		(53.7	)		(52.7	)
Progress payments and advances		(366.5	)		(281.2	)

Total	$	2,687.3		$	2,449.4

In-process inventory included $1,309.8 million and $1,154.2 million at June 30, 2011 and December 31, 2010, respectively, for the following: (1) pre-production and excess-over-average inventory accounted for under long-term contract accounting; and (2) engineering costs recoverable under long-term contractual arrangements. The June 30, 2011 balance of $1,309.8 million included $641.4 million related to the Boeing 787, $265.9 million related to the Airbus A350 XWB and $225.1 million related to the Pratt and Whitney PurePower^® PW 1000G engine contracts.

The Company uses the last-in, first-out (LIFO) cost method of valuing inventory for certain of the Company’s legacy aerospace manufacturing businesses, primarily the aircraft wheels and brakes business in the Actuation and Landing Systems segment. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time.

Progress payments and advances represent (1) non-refundable payments for work-in-process and (2) cash received from government customers where the government has legal title to the work-in-process.