Table 6-6 shows the different stages in the production of an office building. A mining firm extracts iron from the earth. A steel mill converts the iron to steel beams for use in construction. A construction company uses the steel beams to make a building. Assume that the total product of these firms represents the only components of the building and that they will have no other uses.
Table 6-6

-Refer to Table 6-6. Suppose the value-added tax is 10%. What is the total VAT collected from all stages of production including final sale?
A) $1,050,000
B) $127,500
C) $95,000
D) $72,500

Question

Table 6-6 shows the different stages in the production of an office building. A mining firm extracts iron from the earth. A steel mill converts the iron to steel beams for use in construction. A construction company uses the steel beams to make a building. Assume that the total product of these firms represents the only components of the building and that they will have no other uses.
Table 6-6
 
-Refer to Table 6-6. Suppose the value-added tax is 10%. What is the total VAT collected from all stages of production including final sale?
A) $1,050,000 
B) $127,500 
C) $95,000 
D) $72,500

Quizplus · Accepted Answer

The total VAT collected is calculated by applying the 10% tax rate to the value added at each stage of production. The sum of VAT from all stages, including the final sale, amounts to $95,000.

Table 6-6 Shows the Different Stages in the Production of an Office