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 | $45,200 | External failure | Non-value-added | |
| Cable signal testing | 147,900 | Appraisal | Value-added | |
| Reinstalling service (installed incorrectly the first time) | 97,300 | External failure | Non-value-added | |
| Repairing satellite equipment | 52,200 | Internal failure | Non-value-added | |
| Repairing underground cable connections to the customer | 29,400 | External failure | Non-value-added | |
| Replacing old technology cable with higher quality cable | 186,400 | Prevention | Value-added | |
| Replacing old technology signal switches with higher quality switches | 213,000 | Prevention | Value-added | |
| Responding to customer home repair requests | 54,300 | External failure | Non-value-added | |
| Training employees | 44,300 | Prevention | Value-added | |
| Total activity cost | $870,000 | |||
b. Prepare a cost of quality report. Assume that sales are $3,480,000. 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 88b504f8dfe5fef_1 | fill in the blank 88b504f8dfe5fef_2% | fill in the blank 88b504f8dfe5fef_3% |
| Appraisal | fill in the blank 88b504f8dfe5fef_4 | fill in the blank 88b504f8dfe5fef_5% | fill in the blank 88b504f8dfe5fef_6% |
| Internal failure | fill in the blank 88b504f8dfe5fef_7 | fill in the blank 88b504f8dfe5fef_8% | fill in the blank 88b504f8dfe5fef_9% |
| External failure | fill in the blank 88b504f8dfe5fef_10 | fill in the blank 88b504f8dfe5fef_11% | fill in the blank 88b504f8dfe5fef_12% |
| Total | $fill in the blank 88b504f8dfe5fef_13 | fill in the blank 88b504f8dfe5fef_14% | fill in the blank 88b504f8dfe5fef_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 0cfdd1095fe7069_1 | fill in the blank 0cfdd1095fe7069_2% |
| Non-value-added | fill in the blank 0cfdd1095fe7069_3 | fill in the blank 0cfdd1095fe7069_4% |
| Total | $fill in the blank 0cfdd1095fe7069_5 | fill in the blank 0cfdd1095fe7069_6% |
d. What percentage of total costs of quality are considered to be value-added? 68.0%
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Audit Standards A Comparative Analysis
Authors: Walter W. O Willborn
1st Edition
0873890345, 978-0873890342
