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.

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%

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%