Question

Intelligence Incorporated produces 200 computer chips and sells them for $200 each to Bell Computers. Using the chips and other labor and materials, Bell produces 200 personal computers. Bell sells the computers, bundled with software that Bell licenses from Macrosoft at $50 per computer, to PC Charlie’s for $800 each. PC Charlie’s sells the computers to the public for $1,000 each. Calculate the total contribution to GDP using the value-added method.

Answer 1

Answer: $200,000

Explanation:

Intelligence Incorporated:

Computer chips produces = 200

Selling price of each = $200

Total revenue = 200 × $200

                        = $40,000

Cost = $0

Value added = Total revenue - cost

                     =  $40,000 - $0

                     = $40,000

Bell Computers:

Personal computers produces = 200

Selling price of each = $800

Total revenue = 200 × $800

                        = $160,000

Total Cost = cost of computer chips + cost of software

                 = 200 × $200 + 200 × $50

                 = $50,000

Value added = Total revenue - Total cost

                     =  $160,000 - $50,000

                     = $110,000

Macrosoft:

software sold to bell computers

Selling price of each = $50

Total revenue = 200 × $50

                        = $10,000

Total Cost = $0

Value added = Total revenue - Total cost

                     =  $10,000 - $0

                     = $10,000

PC Charlie:

Personal computers purchase = 200

Selling price of each = $1000

Total revenue = 200 × $1,000

                        = $200,000

Total Cost = cost of computers purchased from bell

                 = 200 × $800

                 = $160,000

Value added = Total revenue - Total cost

                     =  $200,000 - $160,000

                     = $40,000

GDP by the value added method = value added by Intelligence Incorporated + value added by Bell Computers + value added by Macrosoft + value added by PC Charlie

                                                        = $40,000 + $110,000 + $10,000 + $40,000

                                                        = $200,000