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.

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 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.

Three Rivers Inc. Value-Added/Non-Value-Added Activity 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.