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Cost of quality and value-added/non-value-added reports for a service company A. Using the information in Exercise 17, identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. B. Prepare a cost of quality report. Assume that sales are $3,000,000. (Round percentages to one decimal place.) C. Prepare a value-added/non-value-added analysis. D. Interpret the information in (B) and (C).

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 27, Problem 18E
Textbook Problem
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Cost of quality and value-added/non-value-added reports for a service company

  1. A. Using the information in Exercise 17, identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added.
  2. B. Prepare a cost of quality report. Assume that sales are $3,000,000. (Round percentages to one decimal place.)
  3. C. Prepare a value-added/non-value-added analysis.
  4. D. Interpret the information in (B) and (C).

a)

To determine

Identify the cost of quality classification for each activity.

Explanation of Solution

Lean Manufacturing: Lean manufacturing aims at reducing the cost and minimizing the waste involved in the production, in order to optimize the value for the product or the service.

Value: Value refers to the additional element provided in the product which caters to the need of the customer and for which the customer is willing to pay.

Value added activities: The value added activities are the activities which add to the value of a product.

Non value added activities: The non-value added activities are the activities which a customer may think unnecessary and tend to reduce the value of a product.

The cost of quality classification for each activity of Company TR is shown below.

ActivitiesActivity CostCost ClassificationValue  based Classification
Billing Error$60,000 External failureNon-value Added
Cable signal testing$140,000 AppraisalValue A...

b)

To determine

Calculate the cost of quality report for Company TR, given the sales for the period was $4,000,000(Round percentages to one decimal place).

c)

To determine

Prepare the Value Added/ Non-Value Added Analysis for Company TR.

d)

To determine

Interpret the Cost of Quality Report and Value Added/ Non-Value Added Analysis of Company TR.

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Chapter 27 Solutions

Financial And Managerial Accounting
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