Assume that a product has the following three stages of production: If the value-added tax (VAT) rate is 20%, what would be the VAT over all stages of production?

Question

Assume that a product has the following three stages of production:  If the value-added tax (VAT) rate is 20%, what would be the VAT over all stages of production?

Quizplus · Accepted Answer

To calculate the VAT over all stages, we need to add the VAT paid at each stage. Let's assume the cost of production at each stage as follows:
Stage 1 = €200
VAT at 20% = €40
Total cost at Stage 1 = €240
Stage 2 = €400
VAT at 20% = €80
Total cost at Stage 2 = €480
Stage 3 = €600
VAT at 20% = €120
Total cost at Stage 3 = €720
Therefore, the VAT over all stages would be €40 + €80 + €120 = €240. Hence, the correct answer is option C (€300).

Assume That a Product Has the Following Three Stages of Production