Question

Davis, Inc., had the following quality costs for the years ended December 31, 20x4 and 20x5: 20x4 20x5 Prevention costs: Quality audits $69,000 $103,500 Vendor certification 127,500 191.250 Appraisal costs: Product acceptance $90,000 $135,000 Process acceptance 97,000 117,500 Internal failure costs: Retesting $92,000 $96,000 Rework 204,000 170,000 External failure costs: Recalls $127,500 $102,000 Warranty 305,000 302,000 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 $11,500,000 for both 20x4 and 20x5. Required: 1. Calculate the budgeted costs for 20x5. Prepare an interim quality performance report. Enter all answers as positive amounts. If there is no variance enter "O" 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".

Answer 1

1 Budgeted Cost for 20x5 $1,217,250 Davis, Inc. Interim Standard Performance Report :Quality Costs For the Year Ended December 31, 20x5 Unfavorable, Actual Budgeted Particulars of Cost costs Costs Variance Favorable or No effect Prevention Costs: Quality audits $69,000 $103,500 $34,500 Unfavorable Vendor Certification $127,500 $191,250 $63,750 Unfavorable Total Prevention Costs $196,500 $294,750 $98,250 Unfavorable Appraisal Costs: Product acceptance $90,000 $135,000 $45,000 Unfavorable Process acceptance $97,000 $117,500 $20,500 Unfavorable Total Appraisal Costs $187,000 $252,500 $65,500 Unfavorable Internal Failure Costs: Retesting $92,000 $96,000 $4,000 Unfavorable Rework $204,000 $170,000 $34,000 Favorable Total Internal Failure Costs $296,000 $266,000 $30,000 Favorable External Failure Costs: Recalls $127,500 $102,000 $25,500 Favorable Warranty $305,000 $302,000 $3,000 Favorable Total External Failure Costs $432,500 $404,000 $28,500 Favorable Total Quality cost Percentage of Sales Sales $1,112,000 $1,217,250 9.67% 10.58% $11,500,000 $11,500,000 $105,250 Unfavorable 0.92% Unfavorable 2 Please give drop down options Answer can be - Not much improvement or target not achieved 3 3 New total budgeted rework cost $255,000 Proportionate to sales ($ 204,000/$11,500,000*$14,375,000)