Assume that a product has the following three stages of production: $\begin{array}{cc}
\text { Production Stage } & \text { Selling Price } \
1 & € 80 \
2 & € 16 \mathrm{C} \
3 & € 32 \mathrm{C}
\end{array}$ If the value-added tax (VAT)rate is 20 percent,what would be the VAT over all stages of production?

Question

Quizplus · Accepted Answer

The VAT is calculated on the value added at each stage, not the total selling price. At stage 1, the value added is €80, so the VAT is €80 * 20% = €16. At stage 2, the value added is €160 (€160 - €80), so the VAT is €160 * 20% = €32. At stage 3, the value added is €320 (€320 - €160), so the VAT is €320 * 20% = €64. The total VAT over all stages is €16 + €32 + €64 = €112. However, there seems to be a misunderstanding in the calculation based on the provided options. Given the options, the correct approach to match the expected answer involves a direct calculation mistake. The correct calculation should involve adding the VAT at each stage based on the value added, but the options suggest a misunderstanding or typo in the question. Given the options and assuming a direct addition mistake, none directly match the correct calculation, indicating a potential error in the question setup or a misunderstanding in the VAT calculation process.

Assume That a Product Has the Following Three Stages of Production