Assume that a product has the following three stages of production: $$\begin{array}{l}
\text { Production Selling }\
\begin{array} { c c }
\text { Stage } & \text { Price } \
\hline 1 & € 1000 \
2 & € 2500 \
3 & € 2,600
\end{array}
\end{array}$$ If the value-added tax (VAT)rate is 15%,what would be the VAT over all stages of production?

Question

Assume that a product has the following three stages of production: $$\begin{array}{l}
\text { Production Selling }\
\begin{array} { c c } 
\text { Stage } & \text { Price } \
\hline 1 & € 1000 \
2 & € 2500 \
3 & € 2,600
\end{array}
\end{array}$$ If the value-added tax (VAT)rate is 15%,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 €1000, at stage 2 is €1500 (€2500 - €1000), and at stage 3 is €100 (€2600 - €2500). The VAT is 15% of the total value added: 0.15 * (€1000 + €1500 + €100) = €390.

Assume That a Product Has the Following Three Stages of Production