Enchante Inc., a designer clothing company buys $400 worth of silk from a silk trader, and $30 worth of accessories from AccessoriesRUs to produce each dress. If the value-added by Enchante is equal to $200, then according to the value-added approach, the price of the designer dress should be: a $200. b $600 c $230. d $630. e $830.

Value added is the difference of the selling price of the product and the costs incurred on the product other than the value added Cost. So this means:

Value Added = Selling Price - Costs incurred on the product other than the value added

Here Value added is $200 and other than value added expenses incurred on the product are $400 and $30. This implies:

$200 = Selling Price - ($400 + $30)

Selling Price = $200 + ($430) = $630

chilljain33 chilljain33 · Answer 2 · 2022-01-22T07:44:34+01:00

The correct statement is that the selling price of the dress should be $630 as per the applications of the value added based approach. So, the correct option is D.

The calculation of the value added approach is the outcome of the selling price of the product from the cost of materials, other than the value added by the business itself.

Calculation of Selling Costs

The formula for the calculation of selling price is as follows,

[tex]\rm Value\ Addition= Selling\ Price - Cost\ of\ Material[/tex]

The given information being that the value added is $200, cost of materials is $430, so the selling price after putting the values in the formula will be,

[tex]\$200= \rm Selling\ Price- \$430\\ \\ Selling\ Price = \$430+\$200\\ \\ Selling\ Price = \$630[/tex]

So the selling price of the designer clothing comes down to $630 as per the value added approach.

Hence, the correct option is D that the selling price of the designer clothing for Enchante Inc. will be $630.

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