Answer Happy

Cost of Quality and Value-Added/Non-Value-Added Reports for a Service Company 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. Activity Cost Quality Cost Classification Value-Added/ Non-Value-Added Classification Quality Control Activities Billing error correction $37,600 Cable signal testing 79,800 Reinstalling service (installed incorrectly the first time) 80,900 Repairing satellite equipment 17,100 Repairing underground cable connections to the customer 24,500 Replacing old technology cable with higher quality cable 119,700 Replacing old technology signal switches with higher quality switches 136,800 Responding to customer home repair requests 45,100 Training employees 28,500 Total activity cost $570,000
b. Prepare a cost of quality report. Assume that sales are $2,850,000. If required, round percentages to one decimal place. Three Rivers Inc. Cost of Quality Report Percent of Total Quality Cost Classification Percent of Total Sales Quality Cost Prevention % % Appraisal % % Internal failure % % External failure % % Total % % c. Prepare a value-added/non-value-added analysis. Three Rivers Inc. Value-Added/Non-Value-Added Activity Analysis Category Amount Percent Value-added % Non-value-added % Total % d. What percentage of total costs of quality are considered to be value-added? Quality Cost