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 Cost		Quality Cost Classification	Value-Added/ Non-Value-Added Classification
Billing error correction	$26,000
Cable signal testing	72,800
Reinstalling service (installed incorrectly the first time)	55,900
Repairing satellite equipment	31,200
Repairing underground cable connections to the customer	16,900
Replacing old technology cable with higher quality cable	120,100
Replacing old technology signal switches with higher quality switches	137,300
Responding to customer home repair requests	31,200
Training employees	28,600
Total activity cost	$520,000

b. Prepare a cost of quality report. Assume that sales are $2,080,000. 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	$fill in the blank 3424b2002f96054_1	fill in the blank 3424b2002f96054_2%	fill in the blank 3424b2002f96054_3%
Appraisal	fill in the blank 3424b2002f96054_4	fill in the blank 3424b2002f96054_5%	fill in the blank 3424b2002f96054_6%
Internal failure	fill in the blank 3424b2002f96054_7	fill in the blank 3424b2002f96054_8%	fill in the blank 3424b2002f96054_9%
External failure	fill in the blank 3424b2002f96054_10	fill in the blank 3424b2002f96054_11%	fill in the blank 3424b2002f96054_12%
Total	$fill in the blank 3424b2002f96054_13	fill in the blank 3424b2002f96054_14%	fill in the blank 3424b2002f96054_15%

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

Three Rivers Inc.
Value-Added/Non-Value-Added Activity Analysis
Category	Amount	Percent
Value-added	$fill in the blank d51d07091ff5072_1	fill in the blank d51d07091ff5072_2%
Non-value-added	fill in the blank d51d07091ff5072_3	fill in the blank d51d07091ff5072_4%
Total	$fill in the blank d51d07091ff5072_5	fill in the blank d51d07091ff5072_6%

d. What percentage of total costs of quality are considered to be value-added? true/false?