Unlike merchandising companies, manufacturing companies must calculate their manufacturing costs based on the volume of their goods and the manufacturing costs. This requires the manufacturing company to prepare an additional statement before preparing the profit and loss statement.
Income statements of manufacturing companies differ in several ways from those of companies in other sectors. The main difference is the manufacturing cost. This includes direct manufacturing costs, including raw material costs, direct labor, and supplies.
A manufacturing company's income statement is a multi-level statement with three inventory accounts that are taken into account when calculating manufacturing costs. These are raw material inventories, work-in-progress inventories, and finished goods inventories.
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