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 willing to pay for are called value added Activities. These Activities adds some value to the products. Remaining all other activities are non-value added activitiesa. Identify the cost of quality classification for each activity and whether the activity is value added and non-value added Quality Control Activities Activity cost Quality cost classification Value-Added/Non value added classification Billing error correction 46,200 External Failure Non value added Activity Cable signal Testing 115,500 Appraisal Non value added Activity Reinstalling Service 99,300 Internal Failure Non value added Activity Repairing satellite equipment 46,200 Internal Failure Non value added Activity Repairing underground cable Connections to the Customer 30,000 Internal Failure Non value added Activity Replacing old technology with Higher Quality cable 158,500 Appraisal value added activtiy Replacing old technology signal switches with higher quality switches 181,100 Appraisal value added activtiy Responding to customer home repair requests 55,500 Internal Failure Non value added Activity Training Employees 37,700 Prevention costs Non value added Activity 770,000 b. Three Rivers Inc Cost Quality Report Quality cost Classification Quality cost Percent of total Quality Percent of sales Prevention costs 37,700 4.90% 1.0% 37700/3850000 Appraisal 455,100 59.10% 11.8% 455100/3850000 Internal Failure 231,000 30.00% 6.0% 231000/3850000 External failure 46,200 6.00% 1.2% 46200/3850000 770,000 c. Three Rivers Inc Value added/Non value-added Analysis Category Amount Percent Value added 339,600 44% Non-Value added 430,400 56% Total 770,000 d. what Percentage of total costs of quality are considered to be value added? 44%

Business

Accounting

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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