Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: 20x4 20x5 Prevention costs: Quality audits $63,000 $94,500 Vendor certification 118,500 177,750 Appraisal costs: Product acceptance $94,000 $141,000 Process acceptance 113,000 117,500 Internal failure costs: Retesting $98,000 $88,000 Rework 204,000 179,000 External failure costs: Recalls $130,000 $104,000 Warranty 300,000 290,000 At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category’s items with the expectation that failure costs would decrease by 20 percent for each item of the failure categories. Sales were $12,500,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. $fill in the blank 4e356df4cfd006b_1 Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "0" for your answer. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table, select "Favorable" if it is favorable, or No effect if there is no change. Round percentage answers to two decimal places. For example, 5.789% would be entered as "5.79". Davis, Inc. Interim Standard Performance Report: Quality Costs For the Year Ended December 31, 20x5 Actual Costs Budgeted Costs Variance Unfavorable, Favorable or No effect Prevention costs: Quality audits $fill in the blank 30e7b9080fd9ff0_2 $fill in the blank 30e7b9080fd9ff0_3 fill in the blank 30e7b9080fd9ff0_4 No effect Vendor certification fill in the blank 30e7b9080fd9ff0_7 fill in the blank 30e7b9080fd9ff0_8 fill in the blank 30e7b9080fd9ff0_9 No effect Total prevention costs $fill in the blank 30e7b9080fd9ff0_11 $fill in the blank 30e7b9080fd9ff0_12 fill in the blank 30e7b9080fd9ff0_13 No effect Appraisal costs: Product acceptance $fill in the blank 30e7b9080fd9ff0_16 $fill in the blank 30e7b9080fd9ff0_17 fill in the blank 30e7b9080fd9ff0_18 No effect Process acceptance fill in the blank 30e7b9080fd9ff0_21 fill in the blank 30e7b9080fd9ff0_22 $fill in the blank 30e7b9080fd9ff0_23 Favorable Total appraisal costs $fill in the blank 30e7b9080fd9ff0_25 $fill in the blank 30e7b9080fd9ff0_26 $fill in the blank 30e7b9080fd9ff0_27 Favorable Internal failure costs: Retesting $fill in the blank 30e7b9080fd9ff0_30 $fill in the blank 30e7b9080fd9ff0_31 $fill in the blank 30e7b9080fd9ff0_32 Unfavorable Rework fill in the blank 30e7b9080fd9ff0_35 fill in the blank 30e7b9080fd9ff0_36 fill in the blank 30e7b9080fd9ff0_37 Unfavorable Total internal failure costs $fill in the blank 30e7b9080fd9ff0_39 $fill in the blank 30e7b9080fd9ff0_40 $fill in the blank 30e7b9080fd9ff0_41 Unfavorable External failure costs: Recalls $fill in the blank 30e7b9080fd9ff0_44 $fill in the blank 30e7b9080fd9ff0_45 fill in the blank 30e7b9080fd9ff0_46 No effect Warranty fill in the blank 30e7b9080fd9ff0_49 fill in the blank 30e7b9080fd9ff0_50 fill in the blank 30e7b9080fd9ff0_51 Unfavorable Total external failure costs $fill in the blank 30e7b9080fd9ff0_53 $fill in the blank 30e7b9080fd9ff0_54 $fill in the blank 30e7b9080fd9ff0_55 Unfavorable Total quality costs $fill in the blank 30e7b9080fd9ff0_57 $fill in the blank 30e7b9080fd9ff0_58 $fill in the blank 30e7b9080fd9ff0_59 Unfavorable Percentage of sales fill in the blank 30e7b9080fd9ff0_61% fill in the blank 30e7b9080fd9ff0_62% fill in the blank 30e7b9080fd9ff0_63% Unfavorable 2. What can be inferred from the report regarding the progress Davis has made? 3. What if sales were $12,500,000 for 20x4 and $15,625,000 for 20x5? What adjustment to budgeted rework costs would be made? (Note: Quality auditing is a discretionary cost and its budget is not affected by the change in sales revenue in 20x5.) New total budgeted rework costs: $fill in the blank 560fe4ffdf87fa6_2

Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: 20x4 20x5 Prevention costs: Quality audits $63,000 $94,500 Vendor certification 118,500 177,750 Appraisal costs: Product acceptance $94,000 $141,000 Process acceptance 113,000 117,500 Internal failure costs: Retesting $98,000 $88,000 Rework 204,000 179,000 External failure costs: Recalls $130,000 $104,000 Warranty 300,000 290,000 At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category’s items with the expectation that failure costs would decrease by 20 percent for each item of the failure categories. Sales were $12,500,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. $fill in the blank 4e356df4cfd006b_1 Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "0" for your answer. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table, select "Favorable" if it is favorable, or No effect if there is no change. Round percentage answers to two decimal places. For example, 5.789% would be entered as "5.79". Davis, Inc. Interim Standard Performance Report: Quality Costs For the Year Ended December 31, 20x5 Actual Costs Budgeted Costs Variance Unfavorable, Favorable or No effect Prevention costs: Quality audits $fill in the blank 30e7b9080fd9ff0_2 $fill in the blank 30e7b9080fd9ff0_3 fill in the blank 30e7b9080fd9ff0_4 No effect Vendor certification fill in the blank 30e7b9080fd9ff0_7 fill in the blank 30e7b9080fd9ff0_8 fill in the blank 30e7b9080fd9ff0_9 No effect Total prevention costs $fill in the blank 30e7b9080fd9ff0_11 $fill in the blank 30e7b9080fd9ff0_12 fill in the blank 30e7b9080fd9ff0_13 No effect Appraisal costs: Product acceptance $fill in the blank 30e7b9080fd9ff0_16 $fill in the blank 30e7b9080fd9ff0_17 fill in the blank 30e7b9080fd9ff0_18 No effect Process acceptance fill in the blank 30e7b9080fd9ff0_21 fill in the blank 30e7b9080fd9ff0_22 $fill in the blank 30e7b9080fd9ff0_23 Favorable Total appraisal costs $fill in the blank 30e7b9080fd9ff0_25 $fill in the blank 30e7b9080fd9ff0_26 $fill in the blank 30e7b9080fd9ff0_27 Favorable Internal failure costs: Retesting $fill in the blank 30e7b9080fd9ff0_30 $fill in the blank 30e7b9080fd9ff0_31 $fill in the blank 30e7b9080fd9ff0_32 Unfavorable Rework fill in the blank 30e7b9080fd9ff0_35 fill in the blank 30e7b9080fd9ff0_36 fill in the blank 30e7b9080fd9ff0_37 Unfavorable Total internal failure costs $fill in the blank 30e7b9080fd9ff0_39 $fill in the blank 30e7b9080fd9ff0_40 $fill in the blank 30e7b9080fd9ff0_41 Unfavorable External failure costs: Recalls $fill in the blank 30e7b9080fd9ff0_44 $fill in the blank 30e7b9080fd9ff0_45 fill in the blank 30e7b9080fd9ff0_46 No effect Warranty fill in the blank 30e7b9080fd9ff0_49 fill in the blank 30e7b9080fd9ff0_50 fill in the blank 30e7b9080fd9ff0_51 Unfavorable Total external failure costs $fill in the blank 30e7b9080fd9ff0_53 $fill in the blank 30e7b9080fd9ff0_54 $fill in the blank 30e7b9080fd9ff0_55 Unfavorable Total quality costs $fill in the blank 30e7b9080fd9ff0_57 $fill in the blank 30e7b9080fd9ff0_58 $fill in the blank 30e7b9080fd9ff0_59 Unfavorable Percentage of sales fill in the blank 30e7b9080fd9ff0_61% fill in the blank 30e7b9080fd9ff0_62% fill in the blank 30e7b9080fd9ff0_63% Unfavorable 2. What can be inferred from the report regarding the progress Davis has made? 3. What if sales were $12,500,000 for 20x4 and $15,625,000 for 20x5? What adjustment to budgeted rework costs would be made? (Note: Quality auditing is a discretionary cost and its budget is not affected by the change in sales revenue in 20x5.) New total budgeted rework costs: $fill in the blank 560fe4ffdf87fa6_2

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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Question

Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5:

	20x4	20x5
Prevention costs:
Quality audits	$63,000	$94,500
Vendor certification	118,500	177,750
Appraisal costs:
Product acceptance	$94,000	$141,000
Process acceptance	113,000	117,500
Internal failure costs:
Retesting	$98,000	$88,000
Rework	204,000	179,000
External failure costs:
Recalls	$130,000	$104,000
Warranty	300,000	290,000

At the end of 20x4, management decided to increase its investment in control costs by 50 percent for each category’s items with the expectation that failure costs would decrease by 20 percent for each item of the failure categories. Sales were $12,500,000 for both 20x4 and 20x5.

Required:

1. Calculate the budgeted costs for 20x5.

$fill in the blank 4e356df4cfd006b_1

Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "0" for your answer. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table, select "Favorable" if it is favorable, or No effect if there is no change. Round percentage answers to two decimal places. For example, 5.789% would be entered as "5.79".

Davis, Inc.
Interim Standard Performance Report: Quality Costs
For the Year Ended December 31, 20x5
	Actual Costs	Budgeted Costs	Variance	Unfavorable, Favorable or No effect
Prevention costs:
Quality audits	$fill in the blank 30e7b9080fd9ff0_2	$fill in the blank 30e7b9080fd9ff0_3	fill in the blank 30e7b9080fd9ff0_4	No effect
Vendor certification	fill in the blank 30e7b9080fd9ff0_7	fill in the blank 30e7b9080fd9ff0_8	fill in the blank 30e7b9080fd9ff0_9	No effect
Total prevention costs	$fill in the blank 30e7b9080fd9ff0_11	$fill in the blank 30e7b9080fd9ff0_12	fill in the blank 30e7b9080fd9ff0_13	No effect
Appraisal costs:
Product acceptance	$fill in the blank 30e7b9080fd9ff0_16	$fill in the blank 30e7b9080fd9ff0_17	fill in the blank 30e7b9080fd9ff0_18	No effect
Process acceptance	fill in the blank 30e7b9080fd9ff0_21	fill in the blank 30e7b9080fd9ff0_22	$fill in the blank 30e7b9080fd9ff0_23	Favorable
Total appraisal costs	$fill in the blank 30e7b9080fd9ff0_25	$fill in the blank 30e7b9080fd9ff0_26	$fill in the blank 30e7b9080fd9ff0_27	Favorable
Internal failure costs:
Retesting	$fill in the blank 30e7b9080fd9ff0_30	$fill in the blank 30e7b9080fd9ff0_31	$fill in the blank 30e7b9080fd9ff0_32	Unfavorable
Rework	fill in the blank 30e7b9080fd9ff0_35	fill in the blank 30e7b9080fd9ff0_36	fill in the blank 30e7b9080fd9ff0_37	Unfavorable
Total internal failure costs	$fill in the blank 30e7b9080fd9ff0_39	$fill in the blank 30e7b9080fd9ff0_40	$fill in the blank 30e7b9080fd9ff0_41	Unfavorable
External failure costs:
Recalls	$fill in the blank 30e7b9080fd9ff0_44	$fill in the blank 30e7b9080fd9ff0_45	fill in the blank 30e7b9080fd9ff0_46	No effect
Warranty	fill in the blank 30e7b9080fd9ff0_49	fill in the blank 30e7b9080fd9ff0_50	fill in the blank 30e7b9080fd9ff0_51	Unfavorable
Total external failure costs	$fill in the blank 30e7b9080fd9ff0_53	$fill in the blank 30e7b9080fd9ff0_54	$fill in the blank 30e7b9080fd9ff0_55	Unfavorable
Total quality costs	$fill in the blank 30e7b9080fd9ff0_57	$fill in the blank 30e7b9080fd9ff0_58	$fill in the blank 30e7b9080fd9ff0_59	Unfavorable
Percentage of sales	fill in the blank 30e7b9080fd9ff0_61%	fill in the blank 30e7b9080fd9ff0_62%	fill in the blank 30e7b9080fd9ff0_63%	Unfavorable

2. What can be inferred from the report regarding the progress Davis has made?

3. What if sales were $12,500,000 for 20x4 and $15,625,000 for 20x5? What adjustment to budgeted rework costs would be made? (Note: Quality auditing is a discretionary cost and its budget is not affected by the change in sales revenue in 20x5.)

New total budgeted rework costs: $fill in the blank 560fe4ffdf87fa6_2

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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