Asked by Seniha Elcik on May 19, 2024
Verified
If a firm hires labor for $6,000,pays rent of $2,000,buys raw materials for $10,000 from another firm,earns profits of $800,and sells its output for $25,000,the value added by the firm is _____.
A) $6,200
B) $9,000
C) $15,000
D) $18,000
E) $18,800
Value Added
The increase in worth of a product or service as a result of a particular process, often characterized by the difference between the price of the finished product and the cost of the inputs involved in making it.
Raw Materials
Basic materials extracted from natural resources or produced through agriculture, which are used in the production of goods and services.
- Expound on the concept of value enhancement by a business and its significance in the determination of Gross Domestic Product.
Verified Answer
SP
Salty ParrottMay 25, 2024
Final Answer :
C
Explanation :
Value added is calculated by subtracting the cost of inputs (labor, rent, raw materials) from the revenue generated by selling the output. Therefore, value added = $25,000 - ($6,000 + $2,000 + $10,000) = $7,000 + $8,000 = $15,000. Therefore, the correct answer is (C).
Learning Objectives
- Expound on the concept of value enhancement by a business and its significance in the determination of Gross Domestic Product.