Interim Quality Performance Report Davis, Inc., had the following quality costs for the years ended

Interim Quality Performance Report

Davis, Inc., had the following quality costs for the years ended December 31, 20×4 and 20×5: 20×4 20×5 Prevention costs:     Quality audits $60,000        $90,000            Vendor certification 119,500        179,250        Appraisal costs:     Product acceptance $90,000        $135,000            Process acceptance 91,000        102,500        Internal failure costs:     Retesting $96,000        $86,000            Rework 200,000        176,000        External failure costs:     Recalls $142,500        $114,000            Warranty 330,000        314,000       

At the end of 20×4, 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 20×4 and 20×5.

Required:

1. Calculate the budgeted costs for 20×5.

$

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, 20×5 Actual Costs Budgeted Costs Variance Unfavorable, Favorable or No effect Prevention costs:

(Process acceptance, product accept, quality audits, recalls, retesting, rework, or warranty) $ $

Favorable, Unfavorable, or No effect

(Process acceptance, product accept, quality audits, recalls, retesting, rework, or warranty) “                  ” Total prevention costs $ $ “                    ” Appraisal costs: “                     ”

(Process acceptance, product accept, quality audits, recalls, retesting, rework, or warranty) $ $

Favorable, Unfavorable, or No effect “                      ” $ “                    ” Total appraisal costs $ $ $ “                    ” Internal failure costs: “                    ”

(Process acceptance, product accept, quality audits, recalls, retesting, rework, or warranty) $ $ $ “                   ” “                       ” “                      ” Total internal failure costs $ $ $

Favorable, Unfavorable, or No effect External failure costs: “                      ”

(Process acceptance, product accept, quality audits, recalls, retesting, rework, or warranty) $ $

Favorable, Unfavorable, or N/A “                     ”

Favorable, Unfavorable, or No effect Total external failure costs $ $ $ “                      ” Total quality costs $ $ $ “                    ” Percentage of sales % % % “                      ”

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

     (Davis has not come close to meeting the planned outcomes, He Has come very close to meeting the planned, or He has exceeded the planned outcomes)

3. What if sales were $11,500,000 for 20×4 and $14,375,000 for 20×5? 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 20×5.)

New total budgeted rework costs: $