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. Quality Control Activities Activity Quality Cost Cost Classification Value-Added/ Non-Value Added - Classification Non-value-added Value-added - Billing error correction $30,700 External failure 115,200 Appraisal 66,000 External failure Non-value-added 44,800 Internal failure Non-value-added 20,000 External failure Non-value-added Cable signal testing Reinstalling service (Installed incorrectly the first time) Repairing satellite equipment Repairing underground cable connections to the customer Replacing old technology cable with higher quality cable Replacing old technology signal switches with higher quality switches Responding to customer home repair requests 137,100 Prevention Value-added - 156,700 Prevention Value-added 36,900 External failure Non-value-added Training employees 32,600 Prevention Value-added Total activity cost $640,000 Feedback Check My Work Correct b. Prepare a cost of quality report. Assume that sales are $2,560,000. If required, round percentages to one decimal place. Three Rivers Inc. Cost of Quality Report Percent of Total Percent of Quality Cost Quality Cost Total Sales Quality Cost Classification Prevention $ % % 90 Appraisal Internal failure 9% % Extemal 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. 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 % Total % Feedback Check My Work c. Reclassify the individual activities as value-added and non-value-added. Calculate the percentage of the total costs that are value-added and those that are non-value-added. d. What percentage of total costs of quality are considered to be value-added? 69.0%