Pure traders as opposed to manufacturers :

• Example of a trader : a garment shop selling dresses
• The purchased goods are identical to the goods sold
• What is the value added of such a business
  • Skill in following the fashion
  • Offer fashionable garments in a downtown location
  • Make a shop welcoming
  • Manage the supply
  • Manage the dead stocks
  • etc.
• The trading account of a trader
• Example of a manufacturer : a small toy manufacturer
• It makes toys out of wood and tape : the example of "Chinese snakes"
• The raw materials : planks and tape spools
• The finished goods : Chinese snakes
• The concept of work in progress stock : piles of tiles cut from planks
• Compute for a manufacturer the equivalent of the cost of goods sold (purchases - delta stocks for a trader)
• Direct manufacturing costs : Raw Materials (adjusted for delta RM stocks), Direct labor, Other
• Indirect mfg costs (Overhead mfg costs) :
  • Indirect labor (maintenance, forklift truck drivers)
  • Other
• This yields the cost of manufactured goods : Finished goods and Work in progress
• Adjustment for the variation in WIP
• This yields the Cost Of the finished Goods Produced (COGP)
• COGP is equivalent to the Purchases of a trader
• COGP adjusted for variation in Finished goods will lead to the Gross margin of the manufacturer

• The dresses of the garment store were also manufactured by someone
• RM : pieces of cloth, thread, buttons...
• Machines : Sewing machines
• Pieces of cloth also were manufactured by someone
• Machines : weaving machines (looms)
• The flying jenny
• The various contemporary technologies (flying, air, water, telescopic needles...)
• The Jacquard weaving machines
• The cards (that lead to computer cards)
• The problems in Lyon
• The Canuts
• The Trade Unions

• Manufacturing companies as opposed to trading companies : examples
• Examples of Service companies too.
• Manufacturing costs of goods produced : Direct costs + Indirect costs (in the factory)
• Direct costs : Raw materials, labor, other direct costs (eg. : electricity consumed by a press)
• Prime costs = total direct costs
• Manufacturing overheads
• Examples : fork lift truck drivers salaries, repair shop people salaries, repair shop other expenses, plant supervisors salaries, etc.
• Total manufacturing expenses
• The three types of stock of a manufacturing company :

• raw materials (also called direct materials) stock,
• work-in-progress stock,
• finished goods stock.

• Adjusting raw material costs of manufactured goods with Opening and Closing raw materials stock.
• Adjusting total manufacturing expenditures with Opening and Closing work-in-progress stock, to obtain Total manufacturing cost of goods produced
• The disputable case of adding some "manufacturing profit" to the manufacturing cost of goods produced
• Why ? To compare in-house production costs (+ some profit) to outside sourcing cost.
• Market value of goods produced

• Once it has been computed, we credit the Manufacturing account for that amount
• And we debit the "Finished goods stock account" for the same amount
• The "Total manufacturing cost of goods produced", of a manufacturing firm, is the equivalent of the "Purchases", of a trading firm.
• Adjusted for the variation in Finished goods stock, it provides the COGS (in the Trading account).

• Put the "Total manufacturing cost of goods produced" in lieu of the "Purchases"
• I.e. debit the Trading account and credit the Finished goods stock account.