Added value

Question 1

How does a business add value

Answer 1

During production they add value to the raw material which it uses when making a product

Question 2

What is the calculation for added value

Answer 2

Price of finished goods sold take away price of raw materials

Question 3

Why can added value not be seen as profit

Answer 3

As added value includes wages and overheads such as insurance and transport which have still to be deducted

Question 4

How can value be added to goods or services

Answer 4

1 purchasing cheaper raw materials (but don’t compromise on quality)
2 improve efficiency of production process (eg have up to date machines)
3 raising price of the product
4 achieve brand status (Chanel perfume sells for much more than its competitors but production is identical
5 offering additional services with the product (- telephone helpline to help with questions)
6 Improve customer access