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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 $75,000 $112,500 Vendor certication 123,500 185,250 Appraisal costs: Product acceptance $89,000 $133,500 Process acceptance 113,000 100,000 Internal failure costs: Retesting $100,000 $98,000 Rework 200,000 182,000 External failure costs: Recalls $150,000 $120,000 Warranty 305,000 310,000 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 $11,000,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. Q] , Feedback Check My Work The costs of quality are associated with two subcategories of quality-related activities: control activities and failure activities. 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 Cosls For the Year Ended December 3;, 20x5 . Unfavorable, Favorable or Actual Costs Budgeted Costs Variance N 0 effect http:r'r'v2.oengagonow.oomfllrnr'takoAssignmenh'iakeAssignmentMain.do?invokomassignn'renissrtakeAssignmontSessionLocainr=assignmem-take&inpr... 113 1111112017 CengageNOWv2 | Dnline ieaohing and learning reeouroe from Cengage Learning Prevention costs: uali audits J $ 112,500 J J E] J No effect J Vendor certication E] J J E] J No effect J Total prevention costs 3' 29-5750 J ' J [I] J No effect J Appraisal 00513: Product \"Gamma 5 133500 J J [j J No effect J Process \"cam-me 100,000 J 159,500 J J Favorable J 'H- Total appraisal costs 233500 J '- 303,000 J I'm Internal failure c0513: UH UHH III III \"E iii Retesting J $ 93,000 J -- 30,000 J $ 18,000 J Unfavorable J Rework J 132:000 J 150:0\" J J Unfavorable J Total intemal failure cosis $ 280,000 J " 240:0\" J ii J Unfavorable J External failure costs: Recalls J $ 120,000 J -- 120,000 J [I] J No effect J Warran_t! J 310,000 J 244,000 J J Unfavorable J .3 a 8 K Unfavorable J Total external failure costs 430:000 J " 364,000 J $ .IIIAT&T LTE 10:23 AM 61} 4 >3 77% (:1! Done 2 of 2 K Rework J 132,000 150,000 11$! Total internal failure cosis 200,000 Unfavorabie J K " 240:0\" u nfavorable J External failure costs: Recalls J "- 120:000 " 120:0\") No effect J 'x'x KR Warrar J 310:0\" 244:0\" Unfavorable J KKKK Total external failure cools " 4313:0013 J " 3544300 Unfavorable J Total quality costs J " 11204350 Unfavorable J Percentage of sales -" J -"b J U nfavorabie J Feedback Check My Work Review the interim quality performance report comparing budgeted and actual performance you have learned in the chapter. 2. What can be inferred from the report regarding the progress Davis has made? Davis has come ve close to meetln the lanned outcomes 3. What if sales were $11,000,000 for 20x4 and $13,750,000 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: SE] X Feedback Check My Work 2. Review the variances arising from comparing actual costs to budgeted costs. htlp:v2.oengagenow.oomlrnakeAseignmenh'iakeAsslgnmentMain.do?invoker=asslgnmenisSdakeAaelgnmeniSesslonLocelor=aesignmeni-takoalnpr... 213 1111712017 GengageNOsz | Onllne leaching and learning resource from Cengage Learning 3. To determine if an adjustment would need to be made, consider whether the cost is fixed or variable. Compare the actual costs for 20x5 to the new budget. Feedbac k Check My Work Partially correct