Examkin

Question

Difficulty: EasyOutput (Value Added) Method of Measurement

Match each stage of production in the palm oil supply chain with its correct net Value Added contribution to National Income based on the transaction values provided.

  • Oil palm farming (Harvested fruits sold for ₦10,000)Value added of ₦10,000
  • Oil milling (Crude palm oil sold for ₦30,000)Value added of ₦20,000
  • Refining (Bottled cooking oil sold for ₦65,000)Value added of ₦35,000
  • Retailing (Final sale to household consumers for ₦80,000)Value added of ₦15,000

Answer

Oil palm farming matches Value added of ₦10,000; Oil milling matches Value added of ₦20,000; Refining matches Value added of ₦35,000; Retailing matches Value added of ₦15,000.
Under the value-added approach, the contribution of each stage to GDP is calculated as Output Value minus Intermediate Consumption. For farming: ₦10,000 - ₦0 = ₦10,000. For milling: ₦30,000 - ₦10,000 = ₦20,000. For refining: ₦65,000 - ₦30,000 = ₦35,000. For retailing: ₦80,000 - ₦65,000 = ₦15,000.

Step-by-Step Solution

1
Calculate Value Added for Stage 1 (Farming)
₦10,000 - ₦0 = ₦10,000
Value added equals total output value minus intermediate input costs.
2
Calculate Value Added for Stage 2 (Milling)
₦30,000 - ₦10,000 = ₦20,000
Subtract the cost of intermediate input (raw fruit at ₦10,000) from output value (crude oil at ₦30,000).
3
Calculate Value Added for Stage 3 (Refining)
₦65,000 - ₦30,000 = ₦35,000
Subtract the cost of crude oil (₦30,000) from the refined oil output value (₦65,000).
4
Calculate Value Added for Stage 4 (Retailing)
₦80,000 - ₦65,000 = ₦15,000
Subtract the wholesale purchase price (₦65,000) from the retail selling price (₦80,000).

Key Concept

The Output (Value Added) method measures national income by summing the net value added at each stage of production to prevent double counting.
Rate this question

Topics

Output (Value Added) Method of Measurement

More questions from this topic