Question

Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are are identified.

a. Identify the cost of quality classification for each activity and whether the activity is value-added or non value-added.

Quality Activities	Activity Cost			Quality Cost Classification	VA/NVA
Billing error correction		$60,000
Cable signal testing		140,000
Reinstalling service (installed incorrectly the first time)		40,000
Repairing satellite equipment		50,000
Repairing underground cable connections to the customer		25,000
Replacing old technology cable with higher quality cable		175,000
Replacing old technology signal switches with higher quality switches		150,000
Responding to customer home repair requests		30,000
Training employees		80,000
Total		$750,000

b. Prepare a cost of quality report. Assume that sales are $3,000,000. If required, round percentages to one decimal place.

Three Rivers Inc.
Cost of Quality Report
Quality Cost Classification	Quality Cost	Percent of Total Quality Cost	Percent of 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
Category	Amount	Percent
Value-added	$	%
Non-value-added		%
Total	$	%

d. What percentage of total costs of quality are considered to be value-added?

Answer 1

t 4,05,000 | 54 13.5 4.67ソ 1.6 % 5.167 Cable signal testHn VAAp l,40,000 | 18.61 о,ООО conneciond to the customan aplacing old technolos cabl 500Bavantion VA with hightes quality ahle alus added I4o,00D 1,75,000 1,50,000 +8o,ooo 5,45,000 Raspondling 30,o00 haining eployes 5,5,oo ale-added Non- ualhne oddled Sales: $ 30,00,000 Total dual it out- 串7,50,000 eaavantion - 1,5,000 + 1,5,8,oco 4,05,o00 la Appraisal- 1,0,00o o,000 Exteanal alue 6o,coo4o,000+ 25,000 +30,000 Totl costs of quality:丰구,50,000 alina -odoled s,45,000 14 雾7,50,000