 We'll take a look at the costs of the manufacturing process and how they flow through the manufacturing process, how we will track and organize these costs as we go. Remember that the major difference between the cost of good sold calculation for a merchandiser, a company that purchases and sells inventory and a manufacturer, one that makes the inventory, is gonna be that a merchandiser has these purchases item where they just gonna purchase the inventory and the manufacturer is gonna have the cost of goods manufactured. So this number then becomes the number that we need to determine. How are we gonna get to this number? If we talk about a merchandiser, it's very easy for us to know what the purchases are because that's what we purchase. That's pretty straightforward. For the manufacturer, however, the cost of the goods we manufacture is gonna include more than just what we purchase, more than just raw material. It's gonna include the things such as direct labor and overhead. So we'll take a look at this in three broad categories. Well, we'll have the materials, we'll have the production and then we'll eventually be selling the materials. We'll make it remember that the end process here is of course the production of inventory, the ultimate goal to be selling it. So most of this that we're thinking about is all kind of balance sheet stuff until we get to the end when we sell it, which is gonna be similar to a merchandising company where once we're at the end, we sell it moving it from the balance sheet to the income statement in the form of cost of goods sold. So first we have the materials that we think of and the materials we can think of will run through a similar process as when we just buy and sell inventory from a merchandising company, meaning we're gonna have the materials that's already in the warehouse, the materials that we have from last month are still there this month. We're gonna include to those materials what we purchase. So we're gonna add purchases to those materials and then we're gonna subtract from them Indian materials, what is still there. We're gonna count the materials, those will be the Indian materials and that will give us the materials used. Now this calculation should look pretty similar to our cost of goods sold. You wanna be able to understand this calculation because it's the same kind of thing for our cost of goods sold for a merchandising company and similar to the cost of goods sold for a manufacturer as well. We have the beginning inventory, materials. We could have a subcategory if we wanted to say materials available for use and then we're gonna subtract out the Indian materials to give us the materials used. So this is gonna be our purchasing and you can think of this just as us purchasing the materials that we have and going through this process to determine the materials that we're gonna use within production. Now once that happens, we're gonna say, okay, that's gonna go to our production area here. This number here is gonna be part of production. This is what we used to produce. But it's not the only thing that we had in production because in production, we also had the beginning work in process. When we think about production, we're thinking about what's in process. Work in process, WIP is often used here. So we're gonna say, well, we already had some stuff that was in work in process. Now in this month, according to this calculation, we included more materials here based on this calculation to the work in process. And so we're gonna add that in. But we're also gonna add direct labor and the overhead. And these are the two areas that are often overlooked within the production process. Because when we think of goods and services, we often think of just the stuff it's made out of. It's made out of plastic. It's made of the guitars made out of wood. But of course, the major components that include that comprise the cost of it are labor and overhead. So we have to include that in the production process. And these two items are the confusing things to most people because they're gonna differ when we record them here as to when we had a service.