Bombardier buys $3 million worth of steel,$2.5 million worth of computer hardware and software,and $1 million worth of mechanical tools to manufacture a certain model of train.Bombardier sells this particular model at $10 million.The value added by Bombardier is equal to:

Question

Quizplus · Accepted Answer

The value added by Bombardier is calculated by subtracting the cost of intermediate goods (inputs) from the final selling price. The total cost of inputs is $3 million (steel) + $2.5 million (hardware/software) + $1 million (tools) = $6.5 million. The final selling price is $10 million. Therefore, the value added is $10 million - $6.5 million = $3.5 million.

Bombardier Buys $3 Million Worth of Steel,$2