Cost of Quality and Value-Added/Non-Value-Added Reports for a Service CompanyThree 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.Value-Added/Activity Quality CostNon-Value-AddedQuality Control ActivitiesCostClassificationClassificationBilling error correction$46,200Cable signal testing115,500Reinstalling service (installed incorrectly the first99,300time)Repairing satellite equipment46,200Repairing underground cable connections to the30,000customerReplacing old technology cable with higher quality158,500cableReplacing old technology signal switches with181,100higher quality switchesResponding to customer home repair requests55,500Training employees37,700Total activity cost$770,000 b. Prepare a cost of quality report. Assume that sales are $3,850,000. If required, round percentages to one decimal place.Three Rivers Inc.Cost of Quality ReportQuality CostPercent of Total Percent ofQuality CostClassificationQuality CostTotal SalesPrevention%%Appraisal%%Internal failure%%External failure%Total%%c. Prepare a value-added/non-value-added analysis.Three Rivers Inc.Value-Added/Non-Value-Added Activity AnalysisCategoryAmountPercentValue-added%Non-value-added%Totald. What percentage of total costs of quality are considered to be value-added?

Activities that help in the transformation of raw materials into finished goods that the buyer is…

b. Prepare a cost of quality report. Assume that sales are $3,850,000. If required, round percentages to one decimal place. Three Rivers Inc. Cost of Quality Report Quality Cost Percent of Total Percent of Quality Cost Classification Quality Cost Total Sales 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 Percent Category Amount Value-added % Non-value-added Total % d. What percentage of total costs of quality are considered to be value-added?

b. Prepare a cost of quality report. Assume that sales are $3,850,000. If required, round percentages to one decimal place. Three Rivers Inc. Cost of Quality Report Quality Cost Percent of Total Percent of Quality Cost Classification Quality Cost Total Sales 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 Percent Category Amount Value-added % Non-value-added Total % d. What percentage of total costs of quality are considered to be value-added?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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. Value-Added/ Non-Value-Added Classification Quality Control Activities Billing error correction Cable signal testing Reinstalling service (installed incorrectly the first time) Repairing satellite equipment Repairing underground cable connections to the customer Replacing old technology cable with higher quality cable Replacing old technology signal switches with higher quality switches Responding to customer home repair requests Training employees Total activity cost Activity Cost $35,400 108,800 76,000 34,000 23,000 151,400 173,000 42,400 36,000 $680,000 Quality Cost Classification Max
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