Quality control activity analysis indicated the following four activity costs of a hotel. Verifying credit card information $52,200 Customer service training 104,400 Discounting room rates due to poor customer service 156,600 Correcting charges to customer invoices 208,800 Total $522,000. Sales are $6,800,000 for the year. Prepare a cost of quality report.

The total cost of quality is $ 313200

Explanation:

First we need to distinguish the costs and allocate them to the correct category for the cost of quality report.

We have verifying credit card information of $52200

Customer service training of $104400

Discounting room rates due to poor service $ 156600

The 4 categories of cost of quality report are Prevention Costs, Appraisal Costs, Internal Failure costs and external failure costs.

Conforming Costs

Customer service training - prevention costs. - $104400       1,53% of total sales

Verifying credit card information - appraisal cost - $52200   0,76% of total

Non-conforming costs

Internal Failure

External Failure costs

Discounting room rates due to poor service $ 156600          2,3% of total sales

Total cost of quality                                          $ 313200         4,6%  of total sales