3. SEGMENT INFORMATION AND GEOGRAPHIC DATA The Company reports segment information based on the  management  approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's operating and reportable segments. The Company manages its business primarily by its product lines. Accordingly, the Company determined its two operating and reporting segments to be loose jewels and finished jewelry. The accounting policies of these segments are the same as those described in Note 2,  Basis of Presentation and Significant Accounting Policies.  The Company evaluates the performance of its segments based on net sales and segment gross profit, or the excess of product sales over segment cost of goods sold. Segment cost of goods sold is defined as product cost of goods sold excluding non-capitalized expenses from the Company's manufacturing and production control departments, comprising personnel costs, depreciation, rent, utilities, and corporate overhead allocations; freight out; manufacturing and physical inventory variances; inventory valuation allowance adjustments; and costs of quality issues and damaged goods. Accordingly, also excluded from the Company's segment performance measures are operating expenses, comprising sales and marketing, general and administrative, and research and development expenses; interest; and taxes. Summary information by segment is as follows: Year Ended December 31, 2011 2010 Loose jewels Net sales $ 12,065,414 $ 10,162,163 Segment cost of goods sold 3,809,579 3,680,550 Segment gross profit $ 8,255,835 $ 6,481,613 Finished jewelry Net sales $ 3,967,994 $ 2,524,608 Segment cost of goods sold 2,193,997 1,933,888 Segment gross profit $ 1,773,997 $ 590,720 A reconciliation of the Company's segment cost of goods sold to cost of goods sold as reported in the consolidated financial statements is as follows: Year Ended December 31, 2011 2010 Segment cost of goods sold $ 6,003,576 $ 5,614,438 Non-capitali