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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:
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:
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 | $21,700 | External failure | Non-value-added | |
Cable signal testing | 49,000 | Appraisal | Value-added | |
Reinstalling service (installed incorrectly the first time) | 46,700 | External failure | Non-value-added | |
Repairing satellite equipment | 10,500 | Internal failure | Non-value-added | |
Repairing underground cable connections to the customer | 14,100 | External failure | Non-value-added | |
Replacing old technology cable with higher quality cable | 76,400 | Prevention | Value-added | |
Replacing old technology signal switches with higher quality switches | 87,400 | Prevention | Value-added | |
Responding to customer home repair requests | 26,000 | External failure | Non-value-added | |
Training employees | 18,200 | Prevention | Value-added | |
Total activity cost | $350,000 |
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b. Prepare a cost of quality report. Assume that sales are $1,400,000. 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 | $ | % | % |
Appraisal | % | % | |
Internal failure | % | % | |
External failure | % | % | |
Total | $ | % |
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