Interim Quality Performance Report Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: 20x4 20x5 Prevention costs: Quality audits $65,000 $97,500 Vendor certification 114,500 171,750 Appraisal costs: Product acceptance $94,000 $141,000 Process acceptance 97,000 102,500 Internal failure costs: Retesting $92,000 $86,000 Rework 200,000 176,000 External failure costs: Recalls $142,500 $114,000 Warranty 300,000 306,000 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 $12,000,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. $fill in the blank af67c1058023fb4_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: $fill in the blank bf1a7b05d077028_2 $fill in the blank bf1a7b05d077028_3 fill in the blank bf1a7b05d077028_4 fill in the blank bf1a7b05d077028_7 fill in the blank bf1a7b05d077028_8 fill in the blank bf1a7b05d077028_9 Total prevention costs $fill in the blank bf1a7b05d077028_11 $fill in the blank bf1a7b05d077028_12 fill in the blank bf1a7b05d077028_13 Appraisal costs: $fill in the blank bf1a7b05d077028_16 $fill in the blank bf1a7b05d077028_17 fill in the blank bf1a7b05d077028_18 fill in the blank bf1a7b05d077028_21 fill in the blank bf1a7b05d077028_22 $fill in the blank bf1a7b05d077028_23 Total appraisal costs $fill in the blank bf1a7b05d077028_25 $fill in the blank bf1a7b05d077028_26 $fill in the blank bf1a7b05d077028_27 Internal failure costs: $fill in the blank bf1a7b05d077028_30 $fill in the blank bf1a7b05d077028_31 $fill in the blank bf1a7b05d077028_32 fill in the blank bf1a7b05d077028_35 fill in the blank bf1a7b05d077028_36 fill in the blank bf1a7b05d077028_37 Total internal failure costs $fill in the blank bf1a7b05d077028_39 $fill in the blank bf1a7b05d077028_40 $fill in the blank bf1a7b05d077028_41 External failure costs: $fill in the blank bf1a7b05d077028_44 $fill in the blank bf1a7b05d077028_45 fill in the blank bf1a7b05d077028_46 fill in the blank bf1a7b05d077028_49 fill in the blank bf1a7b05d077028_50 fill in the blank bf1a7b05d077028_51 Total external failure costs $fill in the blank bf1a7b05d077028_53 $fill in the blank bf1a7b05d077028_54 $fill in the blank bf1a7b05d077028_55 Total quality costs $fill in the blank bf1a7b05d077028_57 $fill in the blank bf1a7b05d077028_58 $fill in the blank bf1a7b05d077028_59 Percentage of sales fill in the blank bf1a7b05d077028_61% fill in the blank bf1a7b05d077028_62% fill in the blank bf1a7b05d077028_63% 2. What can be inferred from the report regarding the progress Davis has made? 3. What if sales were $12,000,000 for 20x4 and $15,000,000 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 5032c2041fe2fe2_2

Interim Quality Performance Report Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: 20x4 20x5 Prevention costs: Quality audits $65,000 $97,500 Vendor certification 114,500 171,750 Appraisal costs: Product acceptance $94,000 $141,000 Process acceptance 97,000 102,500 Internal failure costs: Retesting $92,000 $86,000 Rework 200,000 176,000 External failure costs: Recalls $142,500 $114,000 Warranty 300,000 306,000 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 $12,000,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. $fill in the blank af67c1058023fb4_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: $fill in the blank bf1a7b05d077028_2 $fill in the blank bf1a7b05d077028_3 fill in the blank bf1a7b05d077028_4 fill in the blank bf1a7b05d077028_7 fill in the blank bf1a7b05d077028_8 fill in the blank bf1a7b05d077028_9 Total prevention costs $fill in the blank bf1a7b05d077028_11 $fill in the blank bf1a7b05d077028_12 fill in the blank bf1a7b05d077028_13 Appraisal costs: $fill in the blank bf1a7b05d077028_16 $fill in the blank bf1a7b05d077028_17 fill in the blank bf1a7b05d077028_18 fill in the blank bf1a7b05d077028_21 fill in the blank bf1a7b05d077028_22 $fill in the blank bf1a7b05d077028_23 Total appraisal costs $fill in the blank bf1a7b05d077028_25 $fill in the blank bf1a7b05d077028_26 $fill in the blank bf1a7b05d077028_27 Internal failure costs: $fill in the blank bf1a7b05d077028_30 $fill in the blank bf1a7b05d077028_31 $fill in the blank bf1a7b05d077028_32 fill in the blank bf1a7b05d077028_35 fill in the blank bf1a7b05d077028_36 fill in the blank bf1a7b05d077028_37 Total internal failure costs $fill in the blank bf1a7b05d077028_39 $fill in the blank bf1a7b05d077028_40 $fill in the blank bf1a7b05d077028_41 External failure costs: $fill in the blank bf1a7b05d077028_44 $fill in the blank bf1a7b05d077028_45 fill in the blank bf1a7b05d077028_46 fill in the blank bf1a7b05d077028_49 fill in the blank bf1a7b05d077028_50 fill in the blank bf1a7b05d077028_51 Total external failure costs $fill in the blank bf1a7b05d077028_53 $fill in the blank bf1a7b05d077028_54 $fill in the blank bf1a7b05d077028_55 Total quality costs $fill in the blank bf1a7b05d077028_57 $fill in the blank bf1a7b05d077028_58 $fill in the blank bf1a7b05d077028_59 Percentage of sales fill in the blank bf1a7b05d077028_61% fill in the blank bf1a7b05d077028_62% fill in the blank bf1a7b05d077028_63% 2. What can be inferred from the report regarding the progress Davis has made? 3. What if sales were $12,000,000 for 20x4 and $15,000,000 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 5032c2041fe2fe2_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

Interim Quality Performance Report

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

	20x4	20x5
Prevention costs:
Quality audits	$65,000	$97,500
Vendor certification	114,500	171,750
Appraisal costs:
Product acceptance	$94,000	$141,000
Process acceptance	97,000	102,500
Internal failure costs:
Retesting	$92,000	$86,000
Rework	200,000	176,000
External failure costs:
Recalls	$142,500	$114,000
Warranty	300,000	306,000

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 $12,000,000 for both 20x4 and 20x5.

Required:

1. Calculate the budgeted costs for 20x5.

$fill in the blank af67c1058023fb4_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:
	$fill in the blank bf1a7b05d077028_2	$fill in the blank bf1a7b05d077028_3	fill in the blank bf1a7b05d077028_4
	fill in the blank bf1a7b05d077028_7	fill in the blank bf1a7b05d077028_8	fill in the blank bf1a7b05d077028_9
Total prevention costs	$fill in the blank bf1a7b05d077028_11	$fill in the blank bf1a7b05d077028_12	fill in the blank bf1a7b05d077028_13
Appraisal costs:
	$fill in the blank bf1a7b05d077028_16	$fill in the blank bf1a7b05d077028_17	fill in the blank bf1a7b05d077028_18
	fill in the blank bf1a7b05d077028_21	fill in the blank bf1a7b05d077028_22	$fill in the blank bf1a7b05d077028_23
Total appraisal costs	$fill in the blank bf1a7b05d077028_25	$fill in the blank bf1a7b05d077028_26	$fill in the blank bf1a7b05d077028_27
Internal failure costs:
	$fill in the blank bf1a7b05d077028_30	$fill in the blank bf1a7b05d077028_31	$fill in the blank bf1a7b05d077028_32
	fill in the blank bf1a7b05d077028_35	fill in the blank bf1a7b05d077028_36	fill in the blank bf1a7b05d077028_37
Total internal failure costs	$fill in the blank bf1a7b05d077028_39	$fill in the blank bf1a7b05d077028_40	$fill in the blank bf1a7b05d077028_41
External failure costs:
	$fill in the blank bf1a7b05d077028_44	$fill in the blank bf1a7b05d077028_45	fill in the blank bf1a7b05d077028_46
	fill in the blank bf1a7b05d077028_49	fill in the blank bf1a7b05d077028_50	fill in the blank bf1a7b05d077028_51
Total external failure costs	$fill in the blank bf1a7b05d077028_53	$fill in the blank bf1a7b05d077028_54	$fill in the blank bf1a7b05d077028_55
Total quality costs	$fill in the blank bf1a7b05d077028_57	$fill in the blank bf1a7b05d077028_58	$fill in the blank bf1a7b05d077028_59
Percentage of sales	fill in the blank bf1a7b05d077028_61%	fill in the blank bf1a7b05d077028_62%	fill in the blank bf1a7b05d077028_63%

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

3. What if sales were $12,000,000 for 20x4 and $15,000,000 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 5032c2041fe2fe2_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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