(2) Inventories

Inventories are stated at the lower of cost or market, determined on a first-in, first-out method. The Company monitors standard costs on a monthly basis and updates them annually as necessary to reflect change in raw material costs and labor and overhead rates. Components of inventory cost include materials, labor and manufacturing overhead. Inventories consist of the following (in thousands):

	March 31, 2018		December 31, 2017
Raw materials	$	1,823	$	1,921
Work in process		3,701		3,299
Finished goods		794		1,106
Total	$	6,318	$	6,326

The Company provides inventory allowances when conditions indicate that the selling price could be less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand and reductions in selling prices. The Company balances the need to maintain strategic inventory levels with the risk of obsolescence due to changing technology and customer demand levels. Unfavorable changes in market conditions may result in a need for additional inventory reserves that could adversely impact its gross margins. The inventory reserve balance at March 31, 2018 and December 31, 2017 was $0.5 million. During the three months ended March 31, 2018 and 2017, the Company recorded charges in the condensed consolidated statements of operations for excess and obsolete inventory of $11,000 and $0.1 million, respectively.