Debbie makes porcelain plates in her home and sells them to the Opus gallery. She spent $400 last month on supplies and made 50 plates. She sold the plates to the gallery at $25 per plate. The gallery sells all the plates for $40 each
For all of the 50 plates, what is Debbie's total value added? For all the 50 plates, what is the gallery's total value added?
To determine Debbie's value added, we must find the additional market value she gives to the plates. For each plate, this is the difference between the price she charges the gallery and the cost of her raw materials. Her cost per plate is $400/50 or $8. Her value added per plate is $25 - $8 or $17. Her total value added for all 50 plates is $17 × 50 or $850. The gallery's value added per plate is $40 - $25 = $15. The total value added of the gallery for all 50 plates is 50 × $15 = $750.
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