Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified as follows:

Question Content Area

a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.

Quality Control Activities	Activity Cost		Quality Cost Classification	Value-Added/ Non-Value-Added Classification
Billing error correction	$34,800		AppraisalExternal failureInternal failurePreventionExternal failure	Non-value-addedValue-addedNon-value-added
Cable signal testing	104,400		AppraisalExternal failureInternal failurePreventionAppraisal	Non-value-addedValue-addedValue-added
Reinstalling service (installed incorrectly the first time)	74,800		AppraisalExternal failureInternal failurePreventionExternal failure	Non-value-addedValue-addedNon-value-added
Repairing satellite equipment	40,600		AppraisalExternal failureInternal failurePreventionInternal failure	Non-value-addedValue-addedNon-value-added
Repairing underground cable connections to the customer	22,600		AppraisalExternal failureInternal failurePreventionExternal failure	Non-value-addedValue-addedNon-value-added
Replacing old technology cable with higher quality cable	109,600		AppraisalExternal failureInternal failurePreventionPrevention	Non-value-addedValue-addedValue-added
Replacing old technology signal switches with higher quality switches	125,300		AppraisalExternal failureInternal failurePreventionPrevention	Non-value-addedValue-addedValue-added
Responding to customer home repair requests	41,800		AppraisalExternal failureInternal failurePreventionExternal failure	Non-value-addedValue-addedNon-value-added
Training employees	26,100		AppraisalExternal failureInternal failurePreventionPrevention	Non-value-addedValue-addedValue-added
Total activity cost	$580,000

Question Content Area

b. Prepare a cost of quality report. Assume that sales are $2,900,000. If required, round percentages to one decimal place.

Three Rivers Inc. Cost of Quality Report

Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of Total Sales
Prevention	$fill in the blank 1b9347fd8f9efc7_1	fill in the blank 1b9347fd8f9efc7_2%	fill in the blank 1b9347fd8f9efc7_3%
Appraisal	fill in the blank 1b9347fd8f9efc7_4	fill in the blank 1b9347fd8f9efc7_5%	fill in the blank 1b9347fd8f9efc7_6%
Internal failure	fill in the blank 1b9347fd8f9efc7_7	fill in the blank 1b9347fd8f9efc7_8%	fill in the blank 1b9347fd8f9efc7_9%
External failure	fill in the blank 1b9347fd8f9efc7_10	fill in the blank 1b9347fd8f9efc7_11%	fill in the blank 1b9347fd8f9efc7_12%
Total	$fill in the blank 1b9347fd8f9efc7_13	fill in the blank 1b9347fd8f9efc7_14%	fill in the blank 1b9347fd8f9efc7_15%

Question Content Area

c. Prepare a value-added/non-value-added analysis.

Three Rivers Inc. Value-Added/Non-Value-Added Activity Analysis

Category	Amount	Percent
Value-added	$fill in the blank 514aa6f93045fc5_1	fill in the blank 514aa6f93045fc5_2%
Non-value-added	fill in the blank 514aa6f93045fc5_3	fill in the blank 514aa6f93045fc5_4%
Total	$fill in the blank 514aa6f93045fc5_5	fill in the blank 514aa6f93045fc5_6%

Question Content Area

d. What percentage of total costs of quality are considered to be value-added?

45.0%18.0%63.0%None of these options are correct.

Part B

Jackson Fabricators Inc. machines metal parts for the automotive industry. Under the traditional manufacturing approach, the parts are machined through two processes: milling and finishing. Parts are produced in batch sizes of 75 parts. A part requires 4 minutes in milling and 9 minutes in finishing. The move time between the two operations for a complete batch is 10 minutes.

Under the lean philosophy, the part is produced in a cell that includes both the milling and finishing operations. The operating time is unchanged; however, the batch size is reduced to 5 parts and the move time is eliminated.

Determine the value-added, non-value-added, and total lead times, and the value-added ratio under the traditional and lean manufacturing methods. If required, round percentages to one decimal place.

	Traditional Philosophy		Lean Manufacturing Philosophy
Value-added time	fill in the blank 1	min	fill in the blank 2	min
Non-value-added time	fill in the blank 3	min	fill in the blank 4	min
Total lead time	fill in the blank 5	min	fill in the blank 6	min
Value-added ratio (as a percent)	fill in the blank 7	%	fill in the blank 8	%