Teresa Company has recently launched a product quality improvement program. For the current year 20X5, its goal is to reduce quality costs to \(10 \%\) of sales revenues. The company's actual and budgeted sales and quality costs for \(20 \mathrm{X} 5\) are summarized as follows:

{Required:}
1. Prepare an actual quality cost report for the company, classifying costs by item and category.
2. Prepare a quality performance report to assess the company's quality improvement in \(20 \times 5\).
3. Comment on Teresa Company's quality performance in 20X5.

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Actual Budgeted Sales... ......... $500,000 $600,000 Quality Costs: Raw materials inspection.. 4,000 0.5% of sales Rework.......... 4,000 1.5% of sales Scrap........ 5,000 0.8% of sales Quality planning & training..... 10,000 $8,000 per year Product warranty. 10,000 1.5% of sales Finished product inspection......... 5,000 1.0% of sales Quality reporting & administration.......... 2,000 $3,000 per year Customer complaints ........... 10,000 $8,000 per year Work-in-process inspection.......... 4,000 0.7% of sales Supplier review & evaluation............... 6,000 $5,000 per year