Inventories

Inventories are stated at the lower of cost or net realizable value, and cost is determined by the first-in, first-out (“FIFO”) method. Manufactured inventories consist of the following costs: components, direct labor, and manufacturing overhead. Purchased inventories also include internal purchasing overhead costs. We review inventory quantities on hand and record a provision for excess and obsolete inventory based on forecasts of product demand and production requirements or historical consumption when appropriate.

The components of inventories, net are as follows (in millions):



	July 1, 2017			December 31, 2016
Raw material	$	154		$	172
Work in process	2			1
Finished goods	339			254
Inventories, gross	495			427
Inventory reserves	(81		)	(82		)
Inventories, net	$	414		$	345