Question

1. 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	$71,000	$106,500
   Vendor certification	124,500	186,750
   Appraisal costs:
   Product acceptance	$93,000	$139,500
   Process acceptance	85,000	107,500
   Internal failure costs:
   Retesting	$108,000	$90,000
   Rework	200,000	188,000
   External failure costs:
   Recalls	$135,000	$108,000
   Warranty	315,000	318,000

   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 $11,000,000 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 "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:
   	$	$
   Total prevention costs	$	$
   Appraisal costs:
   	$	$
   			$
   Total appraisal costs	$	$	$
   Internal failure costs:
   	$	$	$
   Total internal failure costs	$	$	$
   External failure costs:
   	$	$
   Total external failure costs	$	$	$
   Total quality costs	$	$	$
   Percentage of sales	%	%	%

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

   3. What if sales were $11,000,000 for 20x4 and $13,750,000 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: $

Answer 1