Cost of Qualityand Value-Added/Non-Value-Added Reports

Digital Light Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Digital Light are identified as follows:

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a. Prepare a cost of quality report. Assume that sales are $2,000,000. If required, round percentages to one decimal place.

Digital Light 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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a. 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 cost as compared to the total costs by dividing individual quality categories by the total. In another column, determine the percent of each quality cost classification as compared to total sales by dividing individual quality costs classes by the total sales amount. Total all columns. Remember that the Percent of total quality costs column should total to 100%.

and.

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b. Prepare a value-addedon-value-added analysis.

Digital Light Inc.
Value-Added/Non-Value-Added Activity Analysis
Category	Amount	Percent
Value-added	$	%
Non-value-added		%
Total	$	%

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b. Reclassify the individual activities as value-added and non-value-added. Calculate the percentage of the total costs that are value added and those that are non-value-added.

and.

c. What percentage of total costs of quality are considered to be value-added? Select52%66%25%34%None of these options.Correct 1 of Item 3

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