Assume that a product has the following three stages of production: $$\begin{array} { c l }
\begin{array} { c }
\text { Production } \
\text { Stage }
\end{array} & \begin{array} { l }
\text { Selling } \
\text { Price }
\end{array} \
\hline 1 & € 600 \
2 & € 1,400 \
3 & € 1,700
\end{array}$$ If the value-added tax (VAT)rate is 15%,what is the incremental VAT at Stage 2 of production?

Question

Assume that a product has the following three stages of production: $$\begin{array} { c l } 
\begin{array} { c } 
\text { Production } \
\text { Stage }
\end{array} & \begin{array} { l } 
\text { Selling } \
\text { Price }
\end{array} \
\hline 1 & € 600 \
2 & € 1,400 \
3 & € 1,700
\end{array}$$ If the value-added tax (VAT)rate is 15%,what is the incremental VAT at Stage 2 of production?

Quizplus · Accepted Answer

To calculate the incremental VAT at Stage 2, we first need to find the value added at Stage 2:
Stage 2 value added = Selling price at Stage 2 – Cost at Stage 1
Stage 2 value added = €1,400 – €600 = €800
Now, we can calculate the VAT at Stage 2 as follows:
VAT at Stage 2 = 15% of Stage 2 value added
VAT at Stage 2 = 0.15 × €800 = €120

Therefore, the incremental VAT at Stage 2 of production is €120, and the correct answer is B).

Assume That a Product Has the Following Three Stages of Production