Cassara, Inc., had the following quality costs for the years ended December 31, 20X1 and 20X2:

At the end of 20X1, management decided to increase its investment in control costs by 40% for each category's items, with the expectation that failure costs would decrease by 25% for each item of the failure categories. Sales were $12,000,000 for both 20X1 and 20X2.
Required:
1. Calculate the budgeted costs for 20X2, and prepare an interim quality performance report.
2. Comment on the significance of the report. How much progress has Cassara made?

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20X1 20X2 Prevention costs: Design reviews Prototype inspection 60,000 120,000 83,000 168,000 Appraisal costs: Field testing Packaging inspection 90,000 75,000 126,000 106,000 Internal failure costs: Scrap Repairs 100,000 220,000 76,200 166,800 External failure costs: Lost salcs Product liability 160,000 360,000 122,000 277,000