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 $39,000 External failure Non value added Cable signal testing 117,000 Appraisal Value added Reinstalling service (installed incorrectly the first time) 83,900 External failure Non value added Repairing satellite equipment 54,600 Internal failure Non value added Repairing underground cable connections to the customer 25,400 External failure Non value added Replacing old technology cable with higher quality cable 173,600 Prevention Value added Replacing old technology signal switches with higher quality switches 198,400 Prevention Value added Responding to customer home repair requests 46,700 External failure Non value added Training employees 41,400 Prevention Value added Total activity cost $780,000 Feedback Correct b Prepare a cost of quality report Assume that sales are $3,120,000 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 $ Appraisal Internal failure External failure Total $ Feedback b Classify each activity as either prevention, appraisal, internal failure or external failure List the total costs of each of these four categories in a column called quality cost In a separate column, determine the percent of each quality cost as compared to the total quality costs by dividing individual quality cost categories by the total quality cost In another column, determine the percent of each quality cost classification as compared to total sales by dividing individual quality cost classes by the total sales amount Total all columns Remember that the Percent of total quality cost column should total to 100 c Prepare a value added non value added analysis Three Rivers Inc Value Added Non Value Added Activity Analysis Category Amount Percent Value added $ Non value added Total $ Feedback

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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	$39,000	External failure	Non-value-added
Cable signal testing	117,000	Appraisal	Value-added
Reinstalling service (installed incorrectly the first time)	83,900	External failure	Non-value-added
Repairing satellite equipment	54,600	Internal failure	Non-value-added
Repairing underground cable connections to the customer	25,400	External failure	Non-value-added
Replacing old technology cable with higher quality cable	173,600	Prevention	Value-added
Replacing old technology signal switches with higher quality switches	198,400	Prevention	Value-added
Responding to customer home repair requests	46,700	External failure	Non-value-added
Training employees	41,400	Prevention	Value-added
Total activity cost	$780,000

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b. Prepare a cost of quality report. Assume that sales are $3,120,000. 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	$	%	%
Appraisal		%	%
Internal failure		%	%
External failure		%	%
Total	$	%	%

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b. Classify each activity as either prevention, appraisal, internal failure or external failure. List the total costs of each of these four categories in a column called quality cost. In a separate column, determine the percent of each quality cost as compared to the total quality costs by dividing individual quality cost categories by the total quality cost. In another column, determine the percent of each quality cost classification as compared to total sales by dividing individual quality cost classes by the total sales amount. Total all columns. Remember that the Percent of total quality cost column should total to 100%.

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