There are three production stages required before a bicycle produced by Masi Bicicletia S.A.can be sold at retail for €3,500.The VAT rate is 15%.Find the total tax liability due.

Question

Quizplus · Accepted Answer

The total tax liability can be calculated by finding the VAT paid at each stage of production and adding them up.

First Stage: 
Value Added = €0 
VAT Paid = €0

Second Stage: 
Value Added = €1,500 (assuming cost of production is €2,000) 
VAT Paid = €225 (15% of €1,500)

Third Stage: 
Value Added = €2,000 (assuming profit margin is €500) 
VAT Paid = €300 (15% of €2,000)

Total VAT Paid = €525 (€225 + €300) 
Therefore, the correct answer is A) €525.

There Are Three Production Stages Required Before a Bicycle Produced