Assume that a product has the following three stages of production: $\begin{array}{cc}
\text { Production Stage } & \text { Selling Price } \
1 & € 80 \
2 & € 16 \mathrm{C} \
3 & € 36 \mathrm{C}
\end{array}$ If the value-added tax (VAT)rate is 10 percent,what would be the VAT over all stages of production?

Question

Quizplus · Accepted Answer

The VAT at each stage is calculated on the value added at that stage, not the total selling price. So, for Stage 1, the VAT is €8 (10% of €80). For Stage 2, the value added is €160 (€160 - €80), so the VAT is €16. For Stage 3, the value added is €360 (€360 - €160), so the VAT is €36. The total VAT over all stages is €8 + €16 + €36 = €60.

Assume That a Product Has the Following Three Stages of Production