What is industrial production? How is the value of industrial production calculated?
Industry plays a vital role in the economy and in people’s lives, particularly through the creation of industrial products. So, what exactly is industrial production, and how is industrial production value calculated? Join Bestray in exploring the article below.
1. What is industrial production?
Industry is a sector of material production comprising a system of narrowly specialized manufacturing branches, each of which includes units of various types. The technical characteristics of industrial production include the nature of the production technology, the nature of the transformation of the objects of labor, and the intended use of the products.
Industrial production is the manufacturing of tangible goods intended to meet human consumption needs or support business activities. It is a large-scale economic and production activity strongly supported by advancements in technology, science, and engineering.
2. Industrial production value
Industrial production value is an aggregate economic indicator reflecting the total value of industrial goods and services produced within a specific period. It plays a vital role in the economic development of both local areas and the nation as a whole, and serves as a key metric for assessing the country’s industrialization process.
Mining industry
In the theoretical study of industrial production value, attention must be paid to the aspect of pricing when calculating production value:
- Basic price: the amount receivable by the producer from the purchaser for a unit of a good or service produced as output, minus any tax payable and plus any subsidy receivable on that unit as a consequence of its production or sale. This price excludes transport charges and trade margins not paid by the producer at the time of sale.
- Basic price: the amount receivable by the producer from the purchaser for a unit of a good or service produced as output, minus any deductible VAT or similar deductible tax. The basic price excludes transport charges and trade margins that are not paid by the producer at the time of sale.
- Final user price: the amount the buyer must pay to receive products and services at the time and place requested by the buyer (excluding deductible VAT or similar taxes). This type of price includes transportation costs paid by the buyer.
3. Calculate industrial production value
Industrial production value is calculated at constant prices and determined using the formula: GO = YT1 + YT2 + YT3 + YT4 + YT5. Where:
Factor 1: Value of finished products
- These are products manufactured using materials supplied by the enterprise itself or by customers for processing. Such products must complete all production stages within the enterprise in strict accordance with established technical and quality standards before they can be entered into finished goods inventory or sold externally.
- The value of semi-finished products, tools and instruments, packaging materials, and spare parts that are no longer used by the enterprise is realized through external sales or by supplying them to non-industrial production units.
- Value of by-products completed during the period.
- Furthermore, in certain specialized industries where warehousing procedures do not apply—such as the production of electricity, potable water, steam, or ice—calculations are based on marketable output or actual consumption volume.
Factor 2: Value of outsourced industrial work (also known as the value of industrial service activities).
Factor 3: The value of by-products, secondary products, defective products, and scrap recovered during the enterprise’s production process:
- By-product: a product generated alongside the main product during an industrial production process. For example, in sugar production, the main product is sugar, while the by-product is molasses.
- Substandard products: products that do not meet quality standards and are not admitted into finished goods inventory.
- Scrap: a manufactured product that is completely defective and cannot be repaired.
- Scrap recovered during the production process.
Factor 4: Value of leasing activities regarding fixed assets, machinery, and equipment within the enterprise’s industrial production line.
Factor 5: The difference in value between the closing and opening balances of semi-finished goods and work-in-progress.
In addition, when calculating industrial production value, the following principles should be taken into account:
- Calculated using the workshop method—meaning the final independent accounting unit is used as the basis for calculation.
- Only the direct results of production activities within an independently accounting unit may be included. This means accounting only for results generated by the enterprise’s own production activities—counted once to avoid double-counting within the enterprise—and excluding products purchased and resold without undergoing processing at the enterprise.
4. Differences between industrial and agricultural production
| Industrial production | Agricultural production |
| Highly concentrated, minimally affected by natural conditions, spatially separable, and capable of having stages carried out simultaneously.
The objects of labor include minerals, means of production, etc. |
Spatially dispersed, profoundly influenced by natural conditions, and involving stages that must follow a mandatory sequence.
The objects of labor are typically crops and livestock. |
5. Conclusion
As the article demonstrates, industrial production plays a vital role in the economy, making the accurate calculation of values essential. To ensure safety during both installation and operation, you might consider Bestray’s range of products—such as cable ladders, wire mesh trays, and cable trays. These solutions are widely used in construction projects, factories, and apartment complexes, as they meet key standards for safety, stability, and cost-efficiency.
With years of experience in the manufacturing, consulting, and supply of electrical equipment, Bestray is committed to delivering top-quality products at reasonable prices. We pride ourselves on our reliability, so you can choose Bestray products with complete confidence. If you would like to learn more about cable ladders, cable trays, and related products, please contact Bestray directly for detailed advice or explore our other articles.
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