Talk:Value added

Incomprehensible definition [ edit ]

As a novice in this topic I found it impossible to understand the first two sentences, the definition of value added. These read:

In business, the difference between the sale price and the production cost of a product is the unit profit. In economics, the sum of the unit profit, the unit depreciation cost, and the unit labor cost is the unit value added.

  1. Why the contrast between 'In business' and 'In economics'? Can the 'business' definition of unit profit be used in the economics definition of value added, or not? With some doubts, I've assumed it can and I should just ignore the 'In business'/'in economics' contrast.
  2. Unit value added is the sum of three things: profit, depreciation cost, and labour cost. Are depreciation and labour cost to be taken as positive or negative values?
  3. Following the link from 'production cost', this is defined as cost of parts + cost of labour + overheads. So unit value added is (sale price - part cost - labour cost - overheads) + depreciation cost + labour cost. Can I simplify things by assuming that 'depreciation' is an overhead, and for this definition the only overhead?
  4. If so then if labour cost and overheads are to be taken as positive values in the definition of value added, then I can simplify the formula to unit value added = sale price - part cost, so labor and depreciation are actually irrelevant, and I can get value added just by buying cheap and selling dear. If they are to be taken as negative values (truly costs) then the formula reduces to unit value added = sale price - part cost - 2*labour cost - 2*overheads, which just sounds random - why precisely 2 times these things?

Can anyone clarify the wording to make it less ambiguous? Marinheiro (talk) 18:05, 23 February 2018 (UTC)

What is this?