Suppose I sell bread loaf for 20 dollars, the cost of raw material like oil,flour,electricity.... is 13 dollar, I pay 2 dollars to my workers, 1 dollar to transportation company to transport it to someplace , finally I make 4 dollar profit. Whats things will be considered for the GDP calculations through value added approach.
Value added GDP measures the total market value of all final goods and services produced in the same country. Intermediate goods (goods or services that are input in the production of other goods) are not included in Value added GDP to avoid double counting.
The making of bread( raw materials) would be the cost of the initial inputs to include transportation services. In the Transportation statistics annual report of 1996 transportation services are components of both final demand and production. However, a large share of transportation activities, like freight, is identified as intermediate inputs.
components of Value Added (VA): Labor Income (LI)[cost of workers], Other Property Income (OPI),[capital costs] and Taxes on Production and Imports (TOPI). So I listed labor separately to be accounted for value added.
Valued Added would omits the following:
the cost of raw material (13 dollar)
1 dollar to transport it to someplace