There Are Three Production Stages Required Before a Bicycle Produced

question 15

Multiple Choice

There are three production stages required before a bicycle produced by Masi Bicicletia S.A.can be sold at retail for €3,500.The VAT rate is 15%.Find the total tax liability due. $\begin{array}{crc}\text { Production stage } & \text { Selling price } & \text { Value Added }& \text { Incremental VAT } \\1 & € 1,000 & \\2 & € 1,750 \\3 & € 3,500\end{array}$

• A)€525
• B)€150
• C)€3,500
• D)None of the above

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Definitions:

Operating Departments

Divisions within an organization directly involved in its core business activities, such as production or sales.

Computer Workstations

High-performance computers designed for technical or scientific applications, often used in professional environments for computing-intensive tasks.

Direct Method

A way of allocating service departments' costs directly to producing departments without any intermediate allocations, used in cost accounting.

Service Department

A division within a business that provides essential support but does not directly add value to the product or service.