Question

Interim Quality Performance Report

Davis, Inc., had the following quality costs for the years ended December 31, 2014 and 2015:

	2014	2015
Prevention costs:
Quality audits	$62,000	$93,000
Vendor certification	126,500	189,750
Appraisal costs:
Product acceptance	$86,000	$129,000
Process acceptance	95,000	105,000
Internal failure costs:
Retesting	$90,000	$88,000
Rework	173,000	230,000
External failure costs:
Recalls	$130,000	$104,000
Warranty	310,000	318,000

At the end of 2014, 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 $11,500,000 for both 2014 and 2015.

Required:

1. Calculate the budgeted costs for 2015.

$______

Note: Enter all answers as positive amounts. If there is no variance enter "O" for your answer. If the budget variance amount is unfavorable enter "U" in the last column of the table, enter"F" if it is favorable, or NA 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, 2015 Actual CostsBudgeted CostsVariance U, F or NA Prevention costs Quallty audits Vendor certification Total prevention costs Appraisal costs Product acc eptance Process acceptance Total appraisal costs Internal failure costs Retesting Total internal failure costs External failure costs: Warranty Total external failure costs Total quality costs Percentage of sales

Answer 1

1 Part 1 2 2014 Amount ($) % change 2015 budgeted cost 4 Prevention costs: 5 Quality audits 6 Vendor certification 7 total prevention costs 8 Appraisal costs: 9 Product acceptance 1O Process acceptance 11 Total appraisal costs 12 Internal failure costs: 13 Retesting 14 Rework 15 Total internal failure costs 16 External failure costs: 17 Recalls 18 Warranty 19 total external failure costs 20 Total quantity costs 62000 126500 188500 1.5 1.5 93000 189750 282750 86000 95000 181000 1.5 1.5 129000 142500 271500 90000 173000 263000 0.8 0.8 72000 138400 210400 130000 310000 440000 1072500 0.8 0.8 104000 248000 352000 1116650

22 Interim Standard performance report (2015) 23 24 Prevention costs: 25 Quality audits 26 Vendor certification 27 total prevention costs 28 Appraisal costs: 29 Product acceptance 30 Process acceptance 31 Total appraisal costs 32 Internal failure costs: 33 Retesting 34 Rework 35 Total internal failure costs 36 External failure costs: 37 Recalls 38 Warranty 39 total external failure costs 40 Total quantity costs Actual Costs Budgeted costs Variance U,F or NA 93000 189750 282750 93000 189750 282750 01 NA 0NA 0 Na 129000 105000 234000 129000 142500 271500 0 Na 37500 37500 88000 230000 318000 72000 138400 210400 16000U 91600U 107600U 104000 318000 422000 1256750 104000 248000 352000 1116650 O NA 70000U 70000 140100