13.7.9

Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows:

Quality Control Activities	Activity Cost		Quality Cost Classification	Value-Added/ Non-Value-Added Classification
Billing error correction	$49,300		External failure	Non-value-added
Cable signal testing	140,800		Appraisal	Value-added
Reinstalling service (installed incorrectly the first time)	106,000		External failure	Non-value-added
Repairing satellite equipment	35,200		Internal failure	Non-value-added
Repairing underground cable connections to the customer	32,000		External failure	Non-value-added
Replacing old technology cable with higher quality cable	192,200		Prevention	Value-added
Replacing old technology signal switches with higher quality switches	219,600		Prevention	Value-added
Responding to customer home repair requests	59,100		External failure	Non-value-added
Training employees	45,800		Prevention	Value-added
Total activity cost	$880,000

Prepare a cost of quality report. Assume that sales are $3,520,000. If required, round percentages to one decimal place

Three Rivers Inc.
Cost of Quality Report
Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
Prevention	___	___	___
Appraisal	___	___	___
Internal failure	___	___	___
External failure	___	___	___
Total	___	___	___

Prepare a value-added/non-value-added analysis.

Three Rivers Inc.
Value-Added/Non-Value-Added Activity Analysis
Category	Amount	Percent
Value-added	___	___
Non-value-added	___	___
Total	___	___

Bright Night, Inc., manufactures light bulbs. Its purchasing policy requires that the purchasing agents place each quarters purchasing requirements out for bid. This is because the Purchasing Department is evaluated solely by its ability to get the lowest purchase prices. The lowest bidder receives the order for the next quarter (90 working days).

To make its bulb products, Bright Night requires 50,400 pounds of glass per quarter. Bright Night received two glass bids for the third quarter, as follows:

• Central Glass Company: $23.00 per pound of glass. Delivery schedule: 50,400 (560 lbs. x 90 days) pounds at the beginning of July to last for 3 months.
• Ithaca Glass Company: $23.15 per pound of glass. Delivery schedule: 560 pounds per working day (90 days in the quarter).

Bright Night accepted Central Glass Companys bid because it was the low-cost bid.

Considering only inventory financing costs, what is the additional cost per pound of Central Glass Companys bid if the annual cost of money is 8%? (Hint: Determine the average value of glass inventory held for the quarter and multiply by the quarterly interest charge, then divide by the number of pounds.) Round to the nearest cent. $____