The most significant difference between a manufacturer's income statement and a merchandiser's income statement is the use of "cost of goods manufactured" in the place of "purchases."

Question

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A manufacturer produces its own products, so the cost of goods sold includes the cost of raw materials, labor, and overhead expenses that are used to manufacture the products. This cost is referred to as "cost of goods manufactured." In contrast, a merchandiser simply buys and sells products, so the cost of goods sold includes the cost of purchasing the products from suppliers, which is referred to as "purchases."

The Most Significant Difference Between a Manufacturer's Income Statement and a Merchandiser's