When something is manufactured, a sum of money is spent on it, usually for the raw materials. That is the production cost. The enhancements a company adds to it’s products before offering it to the final consumer adds value to it and because of these enhancements the company or firm can sell the product at a higher value. This value is called the added value. In other words it is the difference between the sale price and production cost.
Tag: Value Added Concept
-
Value Added Concept
In the business world, the value added concept explains a basic feature of a business.This concept explains that a primary product can be sold for a higher price after some advancements are made to it. For example, if you buy a book for Rs.500 and spend Rs.200 to get it wrapped in a customised wrapping, you would sell it for Rs.750,in order to gain profit. In this case Rs.200 is the added value.
This concept is usually used by sole traders, as they have less room to expand their business, yet it also helps them gain profit.