Question

A wheat farmer produces 2000 bushels of wheat which he sells to a miller for Sh. 20
a bushel. The farmer receives a payment of Sh.______________ from the miller. The
value added by the farmer is Sh. _____________. The miller grinds the wheat into
flour. She makes 1200kgs of flour, which she sells to a baker for Sh.40 per kg. The
miller receives the payment of Sh.____________ from the baker. The value added by
the miller is Sh._____________. The baker bakes the flour into 1000 loaves which he
sells for Sh. 50 apiece to the food distributor. The baker receives a payment of
Sh._____________ from the distributor. The value added by the baker is
Sh._____________. The distributor sells 200 loaves to a local restaurant for Sh. 100
each. The remainder are sold to grocery stores at Sh. 80 each. The distributor receives
payment totaling Sh. ______________. The value added by the distributor is
Sh._______________. At the retail level, the restaurant sells 180 loaves at Sh. 150 each.
20 loaves are unsold and must be discarded. The grocery store sells all of their
consignment for Sh. 100. The retailers receive payment totaling Sh. ____________.
The value added by the retailers is Sh. _____________. The total value added by all
the participants in the production process is Sh. __________________.

Answer 1

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Answer

We follow the formula
Value added = Gross value of output - Intermediate consumption

The farmer receives a payment of 2000*20 = 40,000 Sh.
The value added by farmer is 40,000 . There is no intermediate consumption.
The m Miller receives the payment of    1200*40 = 48000 Sh.
The value added by miller is 48000-40000 = 8000 Sh.
The baker receives the payment of 1000*50 = 50,000 Sh.
Value added by baker is 50,000-48000 = 2000 Sh.
The distributor receives 200*100 + 800 *80 = 20000+64000 = 84000 Sh.
Value added by distributor 84000-50000 = 34000 Sh.
The retailers receive 180*150 + 800*100 = 107000 Sh.
Value added by retailers is 107000-84000 = 23,000 Sh

Value added by all participants = 40000+8000+2000+34000+23000
= 107000 Sh.