Question

2-8. Provide a brief description of value-added selling. What economic forces have motivated companies to adopt value-added selling?

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Answer 1

Value added selling can be explained as the certain part of amount which is added at each step of production from the manufacturing to the end use of commodity. This can be better explained in an example :-

Suppose the product X manufacturing cost is $5 and the wholeselller purchase it in $7 sells it further to retailer for $8. The retail price is known to be $10 and customer (final user) purchases it for $10.

In this case the value addition is at each step and total value added is $5.

​​​​​The economic forces which affects value addition are :-

1. Selling in large quantity
2. Earning profits
3. No large investment required