Question

Explain how business activities and inventories for a manufacturing company, a merchandising company, and a service company differ.

Short answer

A manufacturing business produces a product, which is not the case in merchandising or service businesses.

Step-by-step solution

Meaning of Manufacturing Business

A manufacturing company manufactures completed products from parts, components, or raw materials. A finished good could be sold directly to a consumer or given to another manufacturer for use in a different product.

Explain how manufacturing, merchandising, and service company business activities and inventories differ

The manufacturing business produces a product, whereas the merchandising or service business does not.

The manufacturing business must control and measure three types of inventory to make a product: raw materials, goods in process, and completed goods. On the other hand, a merchandising business must control and measure only merchandise inventory, while service firms usually don't.