Question

A quality control activity analysis indicated the following four activity costs of a hotel.

Verifying credit card information $40,000
Customer service training 20,000
Discounting room rates due to poor customer service 16,000
Correcting charges to customer invoices 8,000
Total $84,000
Sales are $750,000 for the year.
Required:
a. Prepare a cost of quality report. Round your answers to one decimal place, if necessary.

Answer 1

Cost of Quality Report

Quality Cost Classification :Quality Cost

Percentage of total quality cost: Percentage of total Sales

Prevention $20,000 23.8% 2.7%

Appraisal $40,000 47.6% 5.3%

Internal Failure $16,000 19.1% 2.1%

External Failure $ 8,000 9.5% 1.1%

$84,000 100% 11.2%

Step-by-step explanation:

Cost of Quality Report

Quality Cost Classification :Quality Cost

Percentage of total quality cost: Percentage of total Sales

Prevention $20,000 23.8% 2.7%

Appraisal $40,000 47.6% 5.3%

Internal Failure $16,000 19.1% 2.1%

External Failure $ 8,000 9.5% 1.1%

$84,000 100% 11.2%

Total $84,000

Prevention $20,000 /$84,000×100 23.8%

Appraisal $40,000/$84,000×100 47.6%

Internal Failure $16,000/$84,000×100 19.1%

External Failure $ 8,000/$84,000×100 9.5%

Sales =750,000

Prevention $20,000 /$750,000×100

2.7%

Appraisal $40,000/$750,000×100

5.3%

Internal Failure $16,000/$750,000×100 2.1%

External Failure $ 8,000/$750,000×100 1.1%