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:

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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	$28,500		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Cable signal testing	91,200		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Reinstalling service (installed incorrectly the first time)	61,300		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Repairing satellite equipment	39,900		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Repairing underground cable connections to the customer	18,500		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Replacing old technology cable with higher quality cable	124,500		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Replacing old technology signal switches with higher quality switches	142,300		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Responding to customer home repair requests	34,200		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Training employees	29,600		AppraisalExternal failureInternal failurePrevention	Non-value-addedValue-added
Total activity cost	$570,000

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b. Prepare a cost of quality report. Assume that sales are $2,850,000. 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 d642e1fbf05b07d_1	fill in the blank d642e1fbf05b07d_2%	fill in the blank d642e1fbf05b07d_3%
Appraisal	fill in the blank d642e1fbf05b07d_4	fill in the blank d642e1fbf05b07d_5%	fill in the blank d642e1fbf05b07d_6%
Internal failure	fill in the blank d642e1fbf05b07d_7	fill in the blank d642e1fbf05b07d_8%	fill in the blank d642e1fbf05b07d_9%
External failure	fill in the blank d642e1fbf05b07d_10	fill in the blank d642e1fbf05b07d_11%	fill in the blank d642e1fbf05b07d_12%
Total	$fill in the blank d642e1fbf05b07d_13	fill in the blank d642e1fbf05b07d_14%	fill in the blank d642e1fbf05b07d_15%

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

Category	Amount	Percent
Value-added	$fill in the blank d5a292004024fe4_1	fill in the blank d5a292004024fe4_2%
Non-value-added	fill in the blank d5a292004024fe4_3	fill in the blank d5a292004024fe4_4%
Total	$fill in the blank d5a292004024fe4_5	fill in the blank d5a292004024fe4_6%

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

52.0%16.0%68.0%None of these options are correct.