Assume that a product has the following three stages of production: $$\begin{array} { c l }
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 80 \
2 & € 160 \
3 & € 320
\end{array}$$ If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

Question

Assume that a product has the following three stages of production: $$\begin{array} { c l } 
\text { Production } & \text { Selling } \
\text { Stage } & \text { Price } \
\hline 1 & € 80 \
2 & € 160 \
3 & € 320
\end{array}$$ If the value-added tax (VAT)rate is 20%,what would be the VAT over all stages of production?

Quizplus · Accepted Answer

The VAT is calculated on the value added at each stage. The value added at stage 1 is €80, at stage 2 is €80 (€160 - €80), and at stage 3 is €160 (€320 - €160). The VAT for each stage is 20% of the value added: €16 for stage 1, €16 for stage 2, and €32 for stage 3. The total VAT is €16 + €16 + €32 = €64.

Assume That a Product Has the Following Three Stages of Production