Percent of total cost of materials refers to direct charges actually paid or payable for items consumed or put into production during the year, including freight charges and other direct charges incurred by the establishment in acquiring these materials. It includes the cost of materials or fuel consumed, whether purchased by the individual establishment from other companies, transferred to it from other establishments of the same company, or withdrawn from inventory during the year.

Included in this item are:

Cost of parts, components, containers, etc. Includes all raw materials, semifinished goods, parts, containers, scrap, and supplies put into production or used as operating supplies and for repair and maintenance during the year.
Cost of products bought and sold in the same condition.
Cost of fuels consumed for heat and power. Includes the cost of materials or fuel consumed, whether purchased by the individual establishment from other companies, transferred to it from other establishments of the same company, or withdrawn from inventory during the year.
Cost of purchased electricity. The cost of purchased electric energy represents the amount actually used during the year for heat and power. In addition, information is collected on the quantity of electric energy generated by the establishment and the quantity of electric energy sold or transferred to other plants of the same company.
Cost of contract work. This term applies to work done by others on materials furnished by the manufacturing establishment. The actual cost of the material is to be reported on the cost of materials, parts, and containers line of this item. The term "contract work" refers to the fee a company pays to another company to perform a service.

Specific Materials Consumed

In addition to the total cost of materials, which every establishment was required to report, information also was collected for most manufacturing industries on the consumption of major materials used in manufacturing. The inquiries were restricted to those materials that were important parts of the cost of production in a particular industry and for which cost information was available from manufacturers' records. If less than $25,000 of a listed material was consumed by an establishment, the cost data could be reported in the "Cost of all other materials" Census material code 00970099.

Also, the cost of materials for small establishments for which administrative records or short forms were used was imputed into the "Materials not specified by kind" Census material code 00971000.

Duplication in Cost of Materials and Value of Shipments

The aggregate of the cost of materials and value of shipments figures for industry groups and for all manufacturing industries includes large amounts of duplication since the products of some industries are used as materials by others. This duplication results, in part, from the addition of related industries representing successive stages in the production of a finished manufactured product. Examples are the addition of flour mills to bakeries in the food group and the addition of pulp mills to paper mills in the paper and allied products group of industries.

Estimates of the overall extent of this duplication indicate that the value of manufactured products exclusive of such duplication (the value of finished manufactures) tends to approximate two-thirds of the total value of products reported in the survey.

Duplication of products within individual industries is significant within a number of industry groups, e.g., machinery and transportation industries. These industries frequently include complete machinery and their parts. In this case, the parts made for original equipment are materials consumed for assembly plants in the same industry.

Even when no significant amount of duplication is involved, value of shipments figures are deficient as measures of the relative economic importance of individual manufacturing industries or geographic areas because of the wide variation in ratio of materials, labor, and other processing costs of value of shipments, both among industries and within the same industry.

Before 1962, cost of materials and value of shipments were not published for some industries which included considerable duplication. Since then, these data have been published for all industries at the U.S. level and beginning in 1964, for all geographic levels.