Question
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
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 | $49,500 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Cable signal testing | 105,000 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Reinstalling service (installed incorrectly the first time) | 106,400 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Repairing satellite equipment | 22,500 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Repairing underground cable connections to the customer | 32,200 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Replacing old technology cable with higher quality cable | 157,500 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Replacing old technology signal switches with higher quality switches | 180,000 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Responding to customer home repair requests | 59,400 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Training employees | 37,500 | AppraisalExternal failureInternal failurePrevention | Non-value-addedValue-added | |
| Total activity cost | $750,000 | |||
b. Prepare a cost of quality report. Assume that sales are $3,750,000. If required, round percentages to one decimal place.
| Quality Cost Classification | Quality Cost | Percent of Total Quality Cost | Percent of Total Sales |
| Prevention | $fill in the blank fe18f2fdbfba06a_1 | fill in the blank fe18f2fdbfba06a_2% | fill in the blank fe18f2fdbfba06a_3% |
| Appraisal | fill in the blank fe18f2fdbfba06a_4 | fill in the blank fe18f2fdbfba06a_5% | fill in the blank fe18f2fdbfba06a_6% |
| Internal failure | fill in the blank fe18f2fdbfba06a_7 | fill in the blank fe18f2fdbfba06a_8% | fill in the blank fe18f2fdbfba06a_9% |
| External failure | fill in the blank fe18f2fdbfba06a_10 | fill in the blank fe18f2fdbfba06a_11% | fill in the blank fe18f2fdbfba06a_12% |
| Total | $fill in the blank fe18f2fdbfba06a_13 | fill in the blank fe18f2fdbfba06a_14% | fill in the blank fe18f2fdbfba06a_15% |
c. Prepare a value-added/non-value-added analysis.
| Category | Amount | Percent |
| Value-added | $fill in the blank a940a2fe303bf9d_1 | fill in the blank a940a2fe303bf9d_2% |
| Non-value-added | fill in the blank a940a2fe303bf9d_3 | fill in the blank a940a2fe303bf9d_4% |
| Total | $fill in the blank a940a2fe303bf9d_5 | fill in the blank a940a2fe303bf9d_6% |
d. What percentage of total costs of quality are considered to be value-added?
50.0%14.0%64.0%None of these options are correct.
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