Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5:

	20x4	20x5
Prevention costs:
Quality audits	$60,000	$90,000
Vendor certification	116,500	174,750
Appraisal costs:
Product acceptance	$91,000	$136,500
Process acceptance	103,000	112,500
Internal failure costs:
Retesting	$92,000	$82,000
Rework	204,000	170,000
External failure costs:
Recalls	$125,000	$100,000
Warranty	300,000	318,000

At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category's items with the expectation that failure costs would decrease by 20 percent for each item of the failure categories. Sales were $12,000,000 for both 20x4 and 20x5.

Required:

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1. Calculate the budgeted costs for 20x5.

$fill in the blank 5053ca052049f84_1

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Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "0" for your answer. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table, select "Favorable" if it is favorable, or No effect if there is no change. Round percentage answers to two decimal places. For example, 5.789% would be entered as "5.79".

Davis, Inc. Interim Standard Performance Report: Quality Costs For the Year Ended December 31, 20x5

blank	Actual Costs	Budgeted Costs	Variance	Unfavorable, Favorable or No effect
Prevention costs:	blank	blank	blank	blank
Process acceptanceProduct acceptanceQuality auditsRecallsRetestingReworkWarranty	$- Select -	$- Select -	- Select -	FavorableUnfavorableNo effect
Process acceptanceProduct acceptanceRecallsRetestingReworkVendor certificationWarranty	- Select -	- Select -	- Select -	FavorableUnfavorableNo effect
Total prevention costs	$- Select -	$- Select -	- Select -	FavorableUnfavorableNo effect
Appraisal costs:	blank	blank	blank	blank
Product acceptanceQuality auditsRecallsRetestingReworkVendor certificationWarranty	$- Select -	$- Select -	- Select -	FavorableUnfavorableNo effect
Process acceptanceQuality auditsRecallsRetestingReworkVendor certificationWarranty	- Select -	- Select -	$- Select -	FavorableUnfavorableNo effect
Total appraisal costs	$- Select -	$- Select -	$- Select -	FavorableUnfavorableNo effect
Internal failure costs:	blank	blank	blank	blank
Process acceptanceProduct acceptanceQuality auditsRecallsRetestingVendor certificationWarranty	$- Select -	$- Select -	$- Select -	FavorableUnfavorableNo effect
Process acceptanceProduct acceptanceQuality auditsRecallsReworkVendor certificationWarranty	- Select -	- Select -	- Select -	FavorableUnfavorableNo effect
Total internal failure costs	$- Select -	$- Select -	$- Select -	FavorableUnfavorableNo effect
External failure costs:	blank	blank	blank	blank
Process acceptanceProduct acceptanceQuality auditsRecallsRetestingReworkVendor certification	$- Select -	$- Select -	- Select -	FavorableUnfavorableNo effect
Process acceptanceProduct acceptanceQuality auditsRetestingReworkVendor certificationWarranty	- Select -	- Select -	- Select -	FavorableUnfavorableNA
Total external failure costs	$- Select -	$- Select -	$- Select -	FavorableUnfavorableNo effect
Total quality costs	$- Select -	$- Select -	$- Select -	FavorableUnfavorableNo effect
Percentage of sales	- Select -%	- Select -%	- Select -%	FavorableUnfavorableNo effect

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2. What can be inferred from the report regarding the progress Davis has made?

Davis has not come close to meeting the planned outcomesDavis has come very close to meeting the planned outcomesDavis has exceeded the planned outcomes

3. What if sales were $12,000,000 for 20x4 and $15,000,000 for 20x5? What adjustment to budgeted rework costs would be made? (Note: Quality auditing is a discretionary cost and its budget is not affected by the change in sales revenue in 20x5.)

New total budgeted rework costs: $fill in the blank a3501cfaefdaf8d_2