A manufacturing concern determines its DPAD on the profits from the sale of items produced,not on the cost of production.

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DPAD, or Domestic Production Activities Deduction, is a tax incentive for businesses engaged in domestic manufacturing, production, and other qualifying activities. The deduction is based on a percentage of the qualified production activity income (QPAI) of the business. QPAI is generally the gross receipts resulting from the sale, exchange, or other disposition of qualifying products produced in whole or in significant part within the US, minus the cost of goods sold and other deductions. Therefore, the DPAD is based on the profits from the sale of items produced, not on the cost of production.

A Manufacturing Concern Determines Its DPAD on the Profits from the Sale