Davis, Inc., had the following quality costs for the years ended December 31, 2014 and 2015:

	2014	2015
Prevention costs:
Quality audits	$67,000	$100,500
Vendor certification	120,500	180,750
Appraisal costs:
Product acceptance	$85,000	$127,500
Process acceptance	113,000	120,000
Internal failure costs:
Retesting	$98,000	$88,000
Rework	232,000	185,000
External failure costs:
Recalls	$135,000	$108,000
Warranty	345,000	318,000

At the end of 2014, management decided to increase its investment in control costs by 0.5 percent for each categorys items with the expectation that failure costs would decrease by 0.2 percent for each item of the failure categories. Sales were $13,000,000 for both 2014 and 2015.

Required:

1. Calculate the budgeted costs for 2015.

2. What if sales were $13,000,000 for 2014 and $16,250,000 for 2015? 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 2015.)

New total budgeted rework costs: $

Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "O" for your answer. If the budget variance amount is unfavorable enter "U. in the last column of the table, enter"F" if it is favorable, or NA 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, 2015 Actual Costs Budgeted Costs Variance U, F or NA Prevention costs Quality audits 100500 70350 Vendor certification 180750 NA Total prevention costs 281250 Appraisal costs: Product acceptance 127500 Process acceptance 120000 Total appraisal costs 247500 Internal failure costs: 88000 185000 Total internal failure costs 273000 External failure costs: Recalls 108000 Warranty 318000 Total external failure costs 426000 Total quality costs 1227750 Percentage of sales 9.448 Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "O" for your answer. If the budget variance amount is unfavorable enter "U. in the last column of the table, enter"F" if it is favorable, or NA 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, 2015 Actual Costs Budgeted Costs Variance U, F or NA Prevention costs Quality audits 100500 70350 Vendor certification 180750 NA Total prevention costs 281250 Appraisal costs: Product acceptance 127500 Process acceptance 120000 Total appraisal costs 247500 Internal failure costs: 88000 185000 Total internal failure costs 273000 External failure costs: Recalls 108000 Warranty 318000 Total external failure costs 426000 Total quality costs 1227750 Percentage of sales 9.448