Interim Quality Performance Report

Davis, Inc., had the following quality costs for the years endedDecember 31, 20x4 and 20x5:

	20x4	20x5
Prevention costs:
Quality audits	$65,000	$97,500
Vendor certification	123,500	185,250
Appraisal costs:
Product acceptance	$91,000	$136,500
Process acceptance	99,000	110,000
Internal failure costs:
Retesting	$92,000	$96,000
Rework	204,000	173,000
External failure costs:
Recalls	$140,000	$112,000
Warranty	325,000	294,000

At the end of 20x4, management decided to increase itsinvestment in control costs by 50 percent for each category’s itemswith the expectation that failure costs would decrease by 20percent 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 answersas positive amounts. If there is no variance enter "0" for youranswer. 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. Roundpercentage answers to two decimal places. For example, 5.789% wouldbe entered as "5.79".

Davis, Inc.
Interim Standard Performance Report: QualityCosts
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 reportregarding the progress Davis has made?

3. What if sales were$11,500,000 for 20x4 and $14,375,000 for 20x5? What adjustment tobudgeted rework costs would be made? (Note: Quality auditing is adiscretionary cost and its budget is not affected by the change insales revenue in 20x5.)

New total budgeted rework costs: $