Assume that a product has the following three stages of production: $\begin{array}{ccc}
\text { Production Stage } & \text { Selling Price } \
1 & € 10 \
2 & € 250 \
3 & € 1,50 \mathrm{C}
\end{array}$ If the value-added tax (VAT)rate is 20 percent,what would be the VAT over all stages of production?

Question

Assume that a product has the following three stages of production: $\begin{array}{ccc}
\text { Production Stage } & \text { Selling Price } \
1 & €  10 \
2 & €  250 \
3 & €  1,50 \mathrm{C}
\end{array}$ If the value-added tax (VAT)rate is 20 percent,what would be the VAT over all stages of production?

Quizplus · Accepted Answer

The VAT is calculated on the value added at each stage, not the total selling price. The value added at each stage is: Stage 2 - Stage 1 = €240, and Stage 3 - Stage 2 = €1,50C - €250. The "C" seems to be a typo, and assuming it meant to say €150, the value added at Stage 3 would be €150 - €250 = -€100, which doesn't make sense for calculating VAT as value added cannot be negative in this context. Ignoring the apparent typo and focusing on the clear value addition: VAT = 20% of €240 = €48. However, without clear information for Stage 3, we can't accurately calculate the total VAT. Given the options and the context, none directly align with the calculation based on provided clear information, suggesting a misunderstanding or typo in the question. The correct approach involves calculating 20% VAT on the value added at each stage, but the provided information is insufficient or incorrect for a precise calculation.

Assume That a Product Has the Following Three Stages of Production