Assume that a product has the following three stages of production: $\begin{array}{cc}
\text { Production Stage } & \text { Selling Price } \
1 & € 1,00 \mathrm{C} \
2 & € 2,000 \
3 & € 3,000
\end{array}$ If the value-added tax (VAT)rate is 20 percent,what would be the VAT over all stages of production?

Question

Quizplus · Accepted Answer

To calculate the VAT at each stage:
- Stage 1: VAT = 20% * €1,00 = €0,20
- Stage 2: VAT = 20% * (€2,00 + €0,20) = €0,44
- Stage 3: VAT = 20% * (€3,00 + €0,44) = €0,69
Total VAT = €0,20 + €0,44 + €0,69 = €1,33

However, since the question asks for the VAT over all stages of production, we need to calculate the VAT based on the final selling price of the product: €3,000. Therefore, the VAT over all stages of production would be 20% * €3,000 = €600. Hence, the correct answer is B.

Assume That a Product Has the Following Three Stages of Production