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Three Rivers Inc. provides cable TV and Internet service to the local community. The activities and activity costs of Three Rivers are identified. a. Identify the cost of quality classification for each activity and whether the activity is value-added or non-value-added. Quality Cost Quality Control Activities Activity Cost Classification VA/NVA Classification Billing error correction $60,000 External failure Non-value-added Cable signal testing 140,000 Appraisal Value-added Reinstalling service (installed incorrectly 40,000 External failure Non-value-added the first time) Repairing satellite equipment 50,000 Internal failure Non-value-added Repairing underground cable 25,000 External failure Non-value-added connections to the customer Replacing old technology cable with 175,000 Prevention Value-added higher quality cable Replacing old technology signal switches 150,000 Prevention Value-added with higher quality switches Responding to customer home repair 30,000 External failure Non-value-added requests Training employees 80,000 Prevention Value-added Total activity cost $750,000 b. Prepare a cost of quality report. Assume that sales are $3,000,000. If required, round percentages to one decimal place. Three Rivers Inc. Cost of Quality Report Percent of Total Quality Cost Quality Cost Quality Cost Classification Prevention Appraisal Internal failure Percent of Total Sales % % % % % % External failure % % Total % % c. Prepare a value-addedon-value-added analysis. Three Rivers Inc. Value Added/Non-Value-Added Activity Analysis Category Amount Percent Value-added % Non-value-added % Total %

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