What is the added gross value?

Rough added value is an economic measurement used to calculate the productivity of the economy. This measurement works for a specific region, industry or business sector. It is also used in conjunction with the calculation of the gross domestic product (GDP), as the gross added formula includes some of the same basic information. The value -added formula is the difference between total economic production and intermediate consumer goods. Private companies can also use a value -added formula to determine the benefits of profitability of each product line. Gross domestic product represents three items: consumer expenditure, business investment and government expenditure. Consumer expenses represent all expenditures in the nation of individual consumers; Some business purchases may also be in this picture. Business Investments are all large purchases of equipment and equipment of production. Items such as assets of asset, savings and purchases of securities are usually omitted from this number. Government expenditure consistsDays on finished goods and services created by the private sector. Transfer payments are removed from the government part of the expenditure of the gross domestic product of the nation.

Medium consumption goods are the other half of the rough value formula. Since nations produce a wide range of goods and services, the final output includes products used by another company to produce consumer goods and services. For example, car manufacturers need alternators to produce vehicles. Consumers can find little or not using the alternator separately; Therefore, the alternator represents an intermediate product from its primary use from car manufacturers.

For calculating ad gross value, let's assume the following: $ 700 USD (USD) in consumer expenditure, $ 200 in business investment and $ 100 USD in government expenditure. Therefore, the gross domestic product is $ 1,000 ($ 700 + 200 + 100). In the aboveAn example is the middle goods of $ 250 gross domestic product. The gross added value for the economy is $ 750 ($ 1,000 - 250). A character with added value represents all new production of goods or services for the national economy that can provide a more true image of economic wealth.

If you want to convert this formula for using private companies, several changes are required. Companies can use this formula to determine how much revenue the product will contribute to paying fixed costs and total profits. Fixed costs represent loans, rent or rental payments and salaries. Suppose the following: $ 700 on sale, $ 500 at different costs and $ 250 per fixed costs. The gross added value is $ -50 USD, leaving any money to pay full fixed costs or profile. This formula is similar to cost/volume/profit analysis used by managerial accountants.