Sonny

In: English and Literature

Submitted By Mademoiselle
Words 478
Pages 2
cvhkhBckhBcksjbckhbsd.cndsnt Inc. for $15, which converts the steel into a shovel for a bulldozer, creating $10 of additional value. Montreal Equipment Inc. sells it to Construction Retail Supply Company for $40. Thus, $25 is added at this stage of production. Finally, the retailer sells the shovel for $60, creating an additional $20 in value added.
Notice that the final retail price of $60 for the shovel is identical to the sum of the value added created at each stage.

Sales Price Value Added

$1
Fuel $ 1
Mining Company 5 4
Steel Company 15 10
Montreal Equip. Inc. 40 25
Supply Company 60 20 ____ ___ Total Sales $121 $60 EMBED Equation.BREE4

The total of sales prices is $121 and is higher than total value added of $60, due to double counting: the $1 is counted five times, the $4 four times, the $10 three times, and so on.
The value added data sidesteps the double-counting problem that affects other approaches.

Alternatively, the income generated via the value-added approach could be constructed in the following manner:

Stage of Production Sales Receipts - Cost of Intermediate Goods = Value added

Fuel $1 0 1
Mining Company 5 1 4
Steel Company 15 5 10
Montreal Equip Ink 40 15 25
Retail Supply Co. 60 20 20

Total 121 60…...

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