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	$45,500
Cable signal testing	110,500
Reinstalling service (installed incorrectly the first time)	97,800
Repairing satellite equipment	19,500
Repairing underground cable connections to the customer	29,600
Replacing old technology cable with higher quality cable	122,900
Replacing old technology signal switches with higher quality switches	140,400
Responding to customer home repair requests	54,600
Training employees	29,200
Total activity cost	$650,000

b. Prepare a cost of quality report. Assume that sales are $3,250,000. 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 b8c73bf5f00ef96_1	fill in the blank b8c73bf5f00ef96_2%	fill in the blank b8c73bf5f00ef96_3%
Appraisal	fill in the blank b8c73bf5f00ef96_4	fill in the blank b8c73bf5f00ef96_5%	fill in the blank b8c73bf5f00ef96_6%
Internal failure	fill in the blank b8c73bf5f00ef96_7	fill in the blank b8c73bf5f00ef96_8%	fill in the blank b8c73bf5f00ef96_9%
External failure	fill in the blank b8c73bf5f00ef96_10	fill in the blank b8c73bf5f00ef96_11%	fill in the blank b8c73bf5f00ef96_12%
Total	$fill in the blank b8c73bf5f00ef96_13	fill in the blank b8c73bf5f00ef96_14%	fill in the blank b8c73bf5f00ef96_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 1661aaf74fedffd_1	fill in the blank 1661aaf74fedffd_2%
Non-value-added	fill in the blank 1661aaf74fedffd_3	fill in the blank 1661aaf74fedffd_4%
Total	$fill in the blank 1661aaf74fedffd_5	fill in the blank 1661aaf74fedffd_6%

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