Appendix A Explanation of Terms TOTAL OPERATING RECEIPTS-This item in- Total operating receipts, as shown in this report, differ from total sales, as shown in the 1963 Census of Business, because commission salesor sales on the account of others-are included in total operating receipts only at the amount of commission earned- whereas they are included in total sales at the value of the goods sold. The difference between total operating receipts and total sales in 1963 was less than 0.5 percent. For individual kinds of business it differed at most by 2 percent, for most kinds of business by less than 1 percent. Cost of goods sold was compiled for each firm in this survey by adding to the opening inventory all purchases of merchandise during the year and commissions paid to others for purchases on own account and then deducting from the total the end-of-year inventory. Pur employees in 1963 before payroll deductions; for corporations, it includes amounts paid to officers and executives; it does not include payments to or withdrawals by owners or partners of unincorporated businesses. (Employer contributions for unemployment insurance, pension, welfare and other insurance plans are not included in this figure but were separately reported in the survey.) OPERATING EXPENSES-In the 1963 Census of Business, information was collected on operating expenses for all wholesale establishments. However, this information was not available in the amount of detail needed to develop the various measures shown in this report. Separate information was therefore requested in this survey on the following operating expenses: -employer contributions to unemployment -taxes and license fees (excluding income -purchases of office supplies, stationery, -payments for electricity, heating fuel, and water -purchases of containers, wrapping packing, -cost of contract work done by others on A detailed instruction to each of these expense items is included on the questionnaire itself which is shown in appendix C. chases are net of returns, allowances, and trade Scope of the Survey and cash discounts but include payments for " Purchases of tax stamp and payments of excise taxes often included by tobacco and liquor wholesalers in their purchase accounts were, for purposes of this survey, excluded from cost of goods sold and included as a separate item under "operating expenses" used to derive net income produced (at factor cost). ANNUAL PAYROLL-Payroll includes all sal- This report is limited to merchant wholesalers, which constitute the major portion of the broad field of wholesale trade and excludes the other types of wholesale trade, such as manufacturers' sales branches and sales offices, petroleum bulk stations, agents and brokers and assemblers of farm products. In terms of total payroll, merchant wholesalers accounted for more than 60 percent of the payroll for total wholesale trade. All kinds of business in which merchant wholesalers operate are represented. A description of each kind of business for which data are shown in this report is included in appendix B. Data shown in this report are based, in part, on information collected from all merchant wholesalers (which, by definition, are limited to firms with one or more paid employees) in the 1963 Census of Business and, in part, on information collected from a separate sample survey. The information on total operating receipts in this report was collected in the 1963 Census of Business from all merchant wholesalers in operation during 1963. However, information on total operating receipts, costs of goods sold and the detailed operating expenses needed to develop measures of value produced in and by merchant wholesaling firms was not collected from all wholesalers but was limited to a sample of about 10,000 firms-a subsample of the reporting panel of over 17,000 firms used to obtain the monthly sales and inventories data in the Bureau's Monthly Wholesale Trade Report. SAMPLE DESIGN-The sample is a probability sample representing merchant wholesalers in all kinds of business and was selected from two sources: (a) 1958 Census Census of Business lists representing all wholesalers (with paid employees) in business in 1958 and (b) Social Security Administration lists of wholesalers (with paid employees) entering business (or requesting new EI numbers) since 1958. A systematic random sample was drawn from the 1958 Census of Business lists, which had been sorted by sales size and by kind of business, at rates varying according to the sampling variability and the sales volume of each salessize group. The sample was supplemented from the lists of wholesale births obtained from SSA which were sampled in a two-stage sampling procedure. A first-stage sample was selected on the basis of broad trade groups and employeesize classes. On the basis of additional information by kind of business and sales size obtained from the first-stage sample, the firms were arranged by kind of business and salessize groups approximating those used for the census sample and then a second-stage sample was selected for additions to the sample initially drawn from the 1958 census. The number of firms in the sample used for the Monthly Wholesale Trade Report varied for each kind of business from 50 to 650 firms, depending upon the total number of firms in the trade and their distribution by sale size. However, number of firms canvassed for this report to provide measures of value produced in and by merchant wholesaling firms averaged about 200 firms per kind of business-ranging from 34 to 372 firms by kind of business. A more detailed description of the sample design is included in the Bureau's Monthly Wholesale Trade Report. Estimates and Ratios Total operating receipts as shown in this report, were derived from figures collected in the 1963 Census of Business. These figures were also compiled in connection with the sample survey. The ratios to total operating receipts shown in the report were obtained from the sample survey; the dollar volume estimates were derived by multiplying the ratios obtained from the sample survey by the total operating receipts obtained from the 1963 census. The sampling variability of the dollar volume estimates, therefore, is the same as the sampling variability of the ratios. The total operating receipts figure for all merchant wholesalers derived from the census was about 1.3 percent higher than the figures estimated in the sample survey. For many individual kinds of business, these differences were more substantial. Differences between the 1963 census figures and the sample survey figures are attributable to: (a) Sampling errors of the sample survey estimates (b) Changes in kind-of-business classification between the 1958 and 1963 census years (c) Exclusion from the sample survey of firms out of business at the end of 1963 (d) Inclusion in the sample survey of data for auxiliary facilities of wholesale establishments. Respondents in the sample survey were requested to report, on a consolidated basis for all wholesale establishments and their auxiliary facilities-warehouses, garages, etc.-operated under the Federal Employer Identification Number selected in the sample. Although the "operating expense" figures for wholesale establishments in the 1963 census did include a prorata share of the general office expenses, the "payroll" figures in the 1963 census did not include payrolls for their administrative and auxiliary establishments. However, in the sample survey, the payroll figures did reflect the payrolls of the administrative and auxiliary units. The payroll figures shown in this report for all merchant wholesalers is therefore about 5 percent higher than payroll figures reported for merchant wholesaler establishments in the 1963 census. The volume estimates and ratios for summary trade groups were obtained by the addition of the volume estimates computed for individual kinds of business as shown in tables 1 and 2. The same summary trade totals are shown in tables 3 to 6. However, they do not add to the detail, by size of firm or by legal form of organization, shown in these tables for several reasons: (a) Sampling variability of the detail lines. (b) Part-year reporters included in the KB totals are not not shown by size class. (c) Some size classes are not shown separately because of extreme variability. Limitations of the Data SAMPLING VARIABILITY-Since the total operating receipts figures shown in this report are based on a complete enumeration of merchant wholesalers in the 1963 census, they are not subject to sampling variability. However, the selected measures of value produced which are based on a sample are subject to sampling variability and thus are not expected to be in exact agreement with the results that would have been obtained from a complete enumeration. Sampling errors were computed for each of the selected measures of value produced shown on this report. The range of the sampling variability of the measures for each kind of business, size class and legal form of organization are shown in tables 2, 4 and 6 at the one sigma level, i.e., chances are 2 out of 3 that the estimates would differ from the results of a complete enumeration by less than the percentages shown. In general the range of sampling variability of the value produced measure for a given kind of business or size-class was small and the largest sampling error was attributable to the net income produced (at factor cost). Data have been deleted from the tables where the sampling variability was considered excessive. Where such deletions have been made the applicable tables have been foot noted. RESPONSE AND OTHER NONSAMPLING ERRORS--The measures of sampling variability do not include biases which might arise from nonsampling errors such as the failure of respondents to submit correct figures or to submit reports on time for tabulation. Information is not available as to the extent of bias that may be due to errors in reporting. However, to minimize reporting errors, all reports were reviewed for completeness and consistency of the reported data. The various value produced UNPUBLISHED DATA-In order to assure proper reporting of the expenses and receipts items needed to develop the various measures of value produced, the questionnaire requested information in greater detail than has been published. Some of this detail has been tabulated and is available upon request. However, this detail is subject to a much higher sampling error than the published totals and in some instances is subject to a larger nonresponse bias where respondents provided information for totals, but not for the detailed items. Comparison With Other Data STATISTICS OF INCOME, INTERNAL REVENUE SERVICE (IRS)-Statistics of Income issued by the Internal Revenue Service provides information on business receipts, costs of goods sold and selected expense items compiled from the Federal income tax returns. However, the published information is not sufficiently detailed to provide income produced measures comparable to those published in this report. Cost of goods sold-as published in Statistics of Income-includes some costs of labor, materials, and supplies in addition to purchases of merchandise during the year, adjusted for changes between beginning and end-of-year inventories; cost of goods sold-as used in the Census Bureau survey-excludes salaries and wages paid to own employees, and cost of packaging materials and office and other supplies. Business receipts as shown in the Statistics of Income are comparable to total operating receipts as shown in this report. However, the statistics of income data for wholesale trade include all types of wholesalers while this report is limited to merchant wholesalers. Moreover, the IRS data are compiled on a company basis covering all establishments of the firm. Thus, retail, manufacturing, and other establishments operated by firms primarily wholesalers are included in the IRS data; on the other hand, merchant wholesale establishments operated by firms primarily engaged in manufacturing or retail trade are not represented in the IRS statistics for wholesale trade. NATIONAL INCOME ORIGINATING, OFFICE OF BUSINESS ECONOMICS (OBE)-OBE prepares measures of national income originating for each of the industries of the economy, including wholesale trade. National income originating for an industry represents the total factor cost incurred by that industry in producing its output. Factor costs include compensation of employees, income of unincorporated enterprises and corporate profits, including an inventory valuation adjustment, and net interest. These data are derived from a variety of sources, including the Bureau of Employment Security, Internal Revenue Service, and other government and private organizations. For the bulk of the income originating data, the industrial classification is based on the classification of establishments. However, for such items as corporate profits and net interest, the company is the basis of the industry classification. National income originating includes an inventory valuation adjustment and an allowance for bad debts in the accounts of bankrupt debtors not reflected in net income produced (at factor cost); on the other hand, it excludes interest receipts which are included in the net income produced. These differences are relatively small. A more significant difference between these measures is due to coverage. The OBE estimate of national income originating-which amounted to $26,688 million in 1963-covered all types of wholesalers, while the Bureau of the Census estimate of net income produced (at factor cost)-amounting to $17,341 million in 1963-was limited to merchant wholesalers. Merchant wholesalers accounted for 64 percent of total payroll of all wholesalers-virtually the same relationship indicated by the census estimate of net income produced (at factor cost) and the OBE estimate of national income originating. MANUFACTURING AND MINERAL INDUSTRIES "Value added" in manufacturing published by the Bureau of the Census is computed by subtracting the cost of materials, supplies and containers, fuel, purchased electric energy, and contract work from the value of shipments plus receipts for services rendered. This figure is further adjusted to include (a) the value added by any merchandising operation (difference between sales prices and cost value of any merchandise sold without further manufacture, processing or assembly) and (b) to reflect the net change in finished goods and work in process inventories between the beginning and end of year. The definitions of "value added" in manufacturing and in merchant wholesaling are comparable except for the treatment of excise taxes. These taxes are not included in "value added" in manufacturing but for merchant wholesalers are reflected in the gross margin, "value added" and net income produced (at market prices) measures though not in the measure of net income produced (at factor cost). The use of a "value added" measure rather than an "income produced" (or originating) measure in manufacturing initially was dictated by reporting considerations. With the growing importance of purchased services, "value added" has become increasingly less satisfactory as a substitute for "income produced." For all manufacturing industries combined, the ratio in 1958 of national income originating (as estimated by the Office of Business Economics) to "value added" was 73.5 percent of "value added." For all merchant wholesale trades combined, as summarized in this report, the ratio of net income produced to "value added" is 63.9 percent. It should be noted that the difference in handling of excise taxes contributes to the difference between the two ratios and that the ratios for individual manufacturing industries and for individual wholesale trades often vary considerably from the average. "Value added" in the mineral industries differs slightly from the manufactures definition. It is computed by subtracting the cost of supplies, minerals received from other establishments for preparation, purchased fuels and electricity, contract work, and purchased machinery installed from the value of shipments and receipts and capital expenditures. It thus provides a measure, not only of the "value added" in mineral production, but also in the development of mineral properties. Appendix B Kind-of-Business Classifications The kinds of business shown in this report parallel broad classifications shown in the 1957 edition of the Standard Industrial Classification (SIC) Manual and its 1963 Supplement issued by the Bureau of the Budget, Executive Office of the President. However, because in some instances a more detailed classification is required for Census purposes than is available from the SIC Manual, additional kinds of business have been identified within the SIC categories. Each establishment in this survey has been assigned a kind-of-business classification based upon its trade designation and an analysis of its sales by commodity lines as reported to the Bureau of the Census. A description of each kind-ofbusiness classification in this report is given below. It should be noted that kind-of-business classifications are not interchangeable with commodity classifications. Most businesses sell a number of kinds of commodities. The kind-ofbusiness code assigned generally reflects either the individual commodity or commodity group which is the primary source of the establishment's receipts or some mixture of commodities which characterizes the establishment's business. Thus, the classification of establishments by kind of business generally does not make it possible to determine either the number of establishments handling a particular commodity or the sales of that commodity. For example, the "Groceries and related products" classification excludes establishments selling some food if the sale of food is not the primary source of receipts; moreover, even though establishments are classified as "Groceries and related products" some of their receipts may be derived from the sale of nonfood products. An indication of the extent to which commodities are handled by different kinds of business is available in the Census of Business report, Commodity Line Sales. The data in this report for a number of SIC groups have been subdivided, making it necessary to arrive at SIC major group totals by addition. Descriptions of those kinds of business for which data are provided follow. MOTOR VEHICLES, AUTOMOTIVE EQUIPMENT (SIC 501) Establishments primarily engaged in the wholesale distribution of new and used passenger automobiles and other vehicles, automotive parts and accessories, equipment for filling stations and garages, and tires and tubes for passenger and commercial vehicles. Automobiles, other motor vehicles (SIC 5012) Establishments primarily engaged in the wholesale distribution of new and used passenger automobiles and other motor vehicles. Dealers primarily engaged in selling road-type commercial trucks, truck-tractors, truck-trailers, buses, semitrailers, and related vehicles are included. Automotive establishments primarily engaged in selling at retail to individual consumers for personal use and also selling a limited number of new and used passenger automobiles and trucks at wholesale are classified in retail trade. Automotive equipment, tires and tubes (SIC 5013 plus 5014) Establishments primarily engaged in the wholesale distribution of new and used automotive parts and accessories; filling stations and garage service equipment (SIC 5013); also establishments primarily engaged in the wholesale distribution of rubber tires and tubes for passenger and commercial vehicles (SIC 5014). DRUGS, CHEMICALS, ALLIED PRODUCTS (SIC 502) Establishments primarily engaged in the wholesale distribution of drugs, drug proprietaries, druggists' sundries, and toiletries; paints and varnishes in paste or powder form or ready for use; and chemicals and allied products, not elsewhere classified, such as acids, ammonia, industrial and heavy chemicals, dyestuffs, industrial salts, insecticides, naval stores, plastics materials, rosin, and turpentine. Establishments primarily engaged in distributing ammunition and fireworks at wholesale are classified in "Amusement, sporting goods" (part of SIC 5099). Drugs, drug proprietaries, druggists' sundries (SIC 5022) Establishments primarily engaged in the wholesale distribution of drugs, drug proprie |
