1. 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:

   Question Content Area

   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	$44,600		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Cable signal testing	100,800		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Reinstalling service (installed incorrectly the first time)	96,000		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Repairing satellite equipment	43,200		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Repairing underground cable connections to the customer	29,000		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Replacing old technology cable with higher quality cable	148,200		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Replacing old technology signal switches with higher quality switches	169,300		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Responding to customer home repair requests	53,600		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Training employees	35,300		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
   Total activity cost	$720,000

   Question Content Area

   b. Prepare a cost of quality report. Assume that sales are $3,600,000. If required, round percentages to one decimal place.

   blank 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 957b7202df9d03a_1	fill in the blank 957b7202df9d03a_2%	fill in the blank 957b7202df9d03a_3%
   Appraisal	fill in the blank 957b7202df9d03a_4	fill in the blank 957b7202df9d03a_5%	fill in the blank 957b7202df9d03a_6%
   Internal failure	fill in the blank 957b7202df9d03a_7	fill in the blank 957b7202df9d03a_8%	fill in the blank 957b7202df9d03a_9%
   External failure	fill in the blank 957b7202df9d03a_10	fill in the blank 957b7202df9d03a_11%	fill in the blank 957b7202df9d03a_12%
   Total	$fill in the blank 957b7202df9d03a_13	fill in the blank 957b7202df9d03a_14%	fill in the blank 957b7202df9d03a_15%

   Question Content Area

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

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

   Category	Amount	Percent
   Value-added	$fill in the blank 45985800f04eff2_1	fill in the blank 45985800f04eff2_2%
   Non-value-added	fill in the blank 45985800f04eff2_3	fill in the blank 45985800f04eff2_4%
   Total	$fill in the blank 45985800f04eff2_5	fill in the blank 45985800f04eff2_6%

   Question Content Area

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

   49.0%14.0%63.0%None of these options are correct.