Cost Cost of Quality and Value Added/Non-Value Added Reports for a Service Company 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: a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. Value Added/ Activity Quality Cost Non-Value Added Quality Control Activities Classification Classification Billing error correction $31,200 External failure Non-value-added Cable signal testing 102,000 Appraisal Value-added Reinstalling service (installed incorrectly 67,100 the first time) External failure Non-value-added Repairing satellite equipment 24,000 Internal failure Non-value-added Repairing underground cable 20,300 External failure Non-value-added connections to the customer Replacing old technology cable with 133,600 Prevention higher quality cable Value-added Replacing old technology signal switches with higher quality switches 152,600 Prevention Value-added Responding to customer home repair 37,400 External failure Non-value-added requests Training employees 31,800 Prevention Value-added Total activity cost $600,000 Feedback Check My Work Correct b. Prepare a cost of quality report. Assume that sales are $3,000,000. If required, round percentages to one decimal place. Chapter 27 Homework b. Prepare a cost of quality report. Assume that sales are $3,000,000. If required, round percentages to one decimal place. Quality Cost Classification Three Rivers Inc. Cost of Quality Report Percent of Total Percent of Quality Cost Quality Cost Total Sales % % Prevention Appraisal Internal failure % % % % External failure % Total % % Feedback Check My Work b. Classify each activity as either prevention, appraisal, internal failure or external failure. List the total costs of each of these four categories in a column called quality cost. In a separate column, determine the percent of each quality cost as compared to the total quality costs by dividing individual quality cost categories by the total quality cost. In another column, determine the percent of each quality cost classification as compared to total sales by dividing individual quality cost classes by the total sales amount. Total all columns. Remember that the Percent of total quality cost column should total to 100% c. Prepare a value-addedon-value-added analysis. Three Rivers Inc. Value Added/Non-Value Added Activity Analysis Category Amount Percent Value-added % Non-value-added % 9 Total % Feedback