Calculating VAT Owed by Wallis Company for Circuit Board Production

How much VAT does Wallis Company owe?

Wallis company produces circuit boards in a foreign country that imposes a 15 percent VAT. This year, Wallis manufactured 8.3 million boards at a $5 material cost per unit. Wallis labor and overhead added $1 to the cost per unit. Wallis sold the boards to various customers for $7.50 per unit for a net profit of $1.50 per unit. How much VAT does Wallis Company owe?

Answer:

The Wallis Company owes $9,337,500 in VAT.

The Wallis Company owes $9,337,500 in VAT. The answer to the provided question is to determine VAT. 8.3 million boards had been produced by Wallis Company. As a result, the amount sold equals 8.3 million, or 8,300,000. The cost of each unit increased by $1 due to labour and overhead. As opposed to this, the net profit is $7.50 per unit, or $1.50 per unit. Total Sales Value is equal to Sales Quantity multiplied by Selling Price Per Unit, or 8,300,000 x 7.50 = 62,250,000. Calculating the VAT (with a 15% VAT rate imposed) VAT Amount = Sales Value x VAT Rate, which in this case is 62,250,00 x 15%, or 62,250,00 x 15/100, or 62,2500 x 15, which equals 9,337,500. The Wallis Company owes $9,337,500 in VAT.