Digital River Inc. provides cable TV and Internet service to the local community

Question

Digital River Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Digital Light are identified as follows: Activities Activity Cost $36,000.00 96,000.00 30,000.00 36,000.00 18,000.00 168,000.00 126,000.00 24,000.00 66,000.00 $600,000.00 2Billing error correction Cable signal testing 4Reinstalling service (installed incorrectly the first time) 5 Repairing satellite equipment 6 Repairing underground cable connections to the customer 7Replacing old technology cable with higher quality cable 8Replacing old technology signal switches with higher quality switches 9 Responding to customer home repair request 10 Training employees Total Required: A. 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 $2,000,000. Round percentages to one decimal place.* C. Prepare a value-added/non-value-added analysis.* D. Interpret the information in (B) and (C). Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Explanation / Answer

A

B

C

D

85% of total costs of quality are considered to be value added

Activities Cost Of Quality Classification ValueAdded/Non Value Added Billing Error correction Internal Failure Non Value Added Cable signal testing Appraisal Value Added Reinstalling service (installed incorrectly first time) External Failiure Non Value Added Repairing underground cable connection to customers Internal Failure Value Added Repairing satellite equipment Internal Failure Value Added Replacing old technology cable with higher quality cable Prevention Value Added Replacing old technology signal switches with higher quality switches   Prevention Value Added Responding to customer home repair requests External Failure Non Value Added Training Employees Prevention Value Added

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