Interim Quality Performance Report

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

	20x4	20x5
Prevention costs:
Quality audits	$67,000	$100,500
Vendor certification	114,500	171,750
Appraisal costs:
Product acceptance	$89,000	$133,500
Process acceptance	109,000	112,500
Internal failure costs:
Retesting	$92,000	$80,000
Rework	204,000	173,000
External failure costs:
Recalls	$127,500	$102,000
Warranty	315,000	290,000

At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each categorys 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:

1. Calculate the budgeted costs for 20x5.

$

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
	Actual Costs	Budgeted Costs	Variance	Unfavorable, Favorable or No effect
Prevention costs:
Process acceptance Product acceptance Quality audits Recalls Retesting Rework Warranty	$	$		Favorable Unfavorable No effect
Process acceptance Product acceptance Recalls Retesting Rework Vendor certification Warranty				Favorable Unfavorable No effect
Total prevention costs	$	$		Favorable Unfavorable No effect
Appraisal costs:
Product acceptance Quality audits Recalls Retesting Rework Vendor certification Warranty	$	$		Favorable Unfavorable No effect
Process acceptance Quality audits Recalls Retesting Rework Vendor certification Warranty			$	Favorable Unfavorable No effect
Total appraisal costs	$	$	$	Favorable Unfavorable No effect
Internal failure costs:
Process acceptance Product acceptance Quality audits Recalls Retesting Vendor certification Warranty	$	$	$	Favorable Unfavorable No effect
Process acceptance Product acceptance Quality audits Recalls Rework Vendor certification Warranty				Favorable Unfavorable No effect
Total internal failure costs	$	$	$	Favorable Unfavorable No effect
External failure costs:
Process acceptance Product acceptance Quality audits Recalls Retesting Rework Vendor certification	$	$		Favorable Unfavorable No effect
Process acceptance Product acceptance Quality audits Retesting Rework Vendor certification Warranty				Favorable Unfavorable NA
Total external failure costs	$	$	$	Favorable Unfavorable No effect
Total quality costs	$	$	$	Favorable Unfavorable No effect
Percentage of sales	%	%	%	Favorable Unfavorable No effect

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

• Davis has not come close to meeting the planned outcomes
• Davis has come very close to meeting the planned outcomes
• Davis 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: $