Question : A company produces goods worth INR 1,000,000 and incurs intermediate consumption of INR 300,000. It pays wages of INR 200,000 and earns profits of INR 100,000. What is the value added by the company?
Option 1: INR 300,000
Option 2: INR 500,000
Option 3: INR 700,000
Option 4: INR 900,000
Correct Answer: INR 700,000
Solution : The correct answer is (c) INR 700,000
To calculate the value added by the company, we need to subtract the intermediate consumption (cost of goods and services used in production) from the total value of goods produced.
Given:
Total value of goods produced: INR 1,000,000
Intermediate consumption: INR 300,000
To find the value added, we subtract the intermediate consumption from the total value of goods produced:
Value added = Total value of goods produced - Intermediate consumption
Value added = INR 1,000,000 - INR 300,000
Value added = INR 700,000
Therefore, the value added by the company is INR 700,000.
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