Question : A company produces goods worth INR 2,000,000 and incurs intermediate consumption of INR 800,000. It pays wages of INR 500,000 and earns profits of INR 300,000. Additionally, the company pays indirect taxes of INR 200,000. What is the value added by the company?
Option 1: INR 500,000
Option 2: INR 700,000
Option 3: INR 900,000
Option 4: INR 1,100,000
Correct Answer: INR 900,000
Solution : The correct answer is (c) INR 900,000
Total value of goods produced: INR 2,000,000
Intermediate consumption: INR 800,000
Wages: INR 500,000
Profits: INR 300,000
Indirect taxes: INR 200,000
To calculate the value added, we can use the formula:
Value added = Total value of goods produced - Intermediate consumption - Wages - Indirect taxes + Profits
Value added = INR 2,000,000 - INR 800,000 - INR 500,000 - INR 200,000 + INR 300,000
Value added = INR 900,000
Therefore, the value added by the company is INR 900,000.
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