Interim Quality Performance Report

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	123,500	185,250
Appraisal costs:
Product acceptance	$85,000	$127,500
Process acceptance	93,000	102,500
Internal failure costs:
Retesting	$110,000	$92,000
Rework	220,000	179,000
External failure costs:
Recalls	$155,000	$124,000
Warranty	345,000	290,000

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 $12,000,000 for both 2014 and 2015.

Required:

1. Calculate the budgeted costs for 2015.

$

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Correct

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The costs of quality are associated with two subcategories of quality-related activities: control activities and failure activities.

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Solution

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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 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:
Process acceptance Product acceptance Quality audits Recalls Retesting Rework Warranty Correct 14 of Item 2		$		$ Correct 16 of Item 2		Correct 17 of Item 2		Correct 18 of Item 2
Process acceptance Product acceptance Recalls Retesting Rework Vendor certification Warranty Correct 19 of Item 2
Total prevention costs		$		$
Appraisal costs:
Product acceptance Quality audits Recalls Retesting Rework Vendor certification Warranty Correct 34 of Item 2		$		$
Process acceptance Quality audits Recalls Retesting Rework Vendor certification Warranty Correct 39 of Item 2						$
Total appraisal costs		$		$		$
Internal failure costs:
Process acceptance Product acceptance Quality audits Recalls Retesting Vendor certification Warranty Correct 54 of Item 2		$		$		$
Process acceptance Product acceptance Quality audits Recalls Rework Vendor certification Warranty Correct 59 of Item 2
Total internal failure costs		$		$		$
External failure costs:
Process acceptance Product acceptance Quality audits Recalls Retesting Rework Vendor certification Correct 74 of Item 2		$		$
Process acceptance Product acceptance Quality audits Retesting Rework Vendor certification Warranty Correct 79 of Item 2
Total external failure costs		$		$		$
Total quality costs		$		$		$
Percentage of sales		%		%		%

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Partially Correct

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Review the interim quality performance report comparing budgeted and actual performance you have learned in the chapter.

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Solution

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

- Select your answer -Davis has not come close to meeting the planned outcomesDavis has come very close to meeting the planned outcomesDavis has exceeded the planned outcomesCorrect 1 of Item 3

3. What if sales were $12,000,000 for 2014 and $15,000,000 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: $