Question
Digital River Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Digital Light are identified as follows:
Digital River Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Digital Light are identified as follows:
| 1 | Activities | Activity Cost |
| 2 | Billing error correction | $36,000.00 |
| 3 | Cable signal testing | 96,000.00 |
| 4 | Reinstalling service (installed incorrectly the first time) | 30,000.00 |
| 5 | Repairing satellite equipment | 36,000.00 |
| 6 | Repairing underground cable connections to the customer | 18,000.00 |
| 7 | Replacing old technology cable with higher quality cable | 168,000.00 |
| 8 | Replacing old technology signal switches with higher quality switches | 126,000.00 |
| 9 | Responding to customer home repair requests | 24,000.00 |
| 10 | Training employees | 66,000.00 |
| 11 | Total | $600,000.00 |
Review the Pareto Charts in the panels. Select the Pareto chart that best reflects these activities.
A. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.
| Quality Activities | Activity Cost | Quality Cost Classification | VA/NVA |
| Billing error correction | $ 36,000 | External failure | Non-value-added |
| Cable signal testing | 96,000 | Appraisal | Value-added |
| Reinstalling service (installed incorrectly the first time) | 30,000 | External failure | Non-value-added |
| Repairing satellite equipment | 36,000 | Internal failure | Non-value-added |
| Repairing underground cable connections to the customer | 18,000 | External failure | Non-value-added |
| Replacing old technology cable with higher quality cable | 168,000 | Prevention | Value-added |
| Replacing old technology signal switches with higher quality switches | 126,000 | Prevention | Value-added |
| Responding to customer home repair requests | 24,000 | External failure | Non-value-added |
| Training employees | 66,000 | Prevention | Value-added |
| Total | $600,000 |
B. Prepare a cost of quality report. Assume that sales are $2,000,000. Round percentages to one decimal place. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
| Digital River Inc. |
| Cost of Quality Report |
| 1 | Quality Cost Classification | Quality Cost | Percent of Total Quality Cost | Percent of Total Sales |
| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | Total |
C. Prepare a value-addedon-value-added analysis. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
Question not attempted.
Score: 0/36
| Digital River Inc. |
| Value-Added/Non-Value-Added Activity Analysis |
| 1 | Category | Amount | Percent |
| 2 | |||
| 3 | |||
| 4 | Total |
D. Interpret the information in (B) and (C).
What percentage of total costs of quality are considered to be value-added? %
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Principles Of Financial Accounting Ch 1 17
Authors: Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton
1st Edition
0077370457, 9780077370459
