BS8- Added Value

Question 1

What is added value?

Answer 1

The difference between the actual price charged for a product or service and the actual cost of all the components and assembly of the product or service.

Question 2

How can added value be calculated?

Answer 2

Value added = selling price - cost of inputs

Question 3

List three ways a business can add value

Answer 3

• Submit high-quality work
• Make a unique product
• Encourage faster production

Question 4

What are the benefits to the business of adding value?

Answer 4

• allows to charge a higher price
• a higher level of profit
• higher price may enhance the image of the product or service
• it may enable the business to target its chosen market more easily

Question 5

What are the potential drawbacks of adding value?

Answer 5

• Value-adding items and services can still cost the business if not calculated correctly.
• New clients may not be drawn to these as much as a straight discount.

Question 6

Identify two other stakeholders and identify the benefits to the stakeholders of adding value

Answer 6

Shareholders- may benefit as profits increase, therefore dividends may increase also
Customer- will benefit from a more unique product