In 2018, Creative Design, Inc., instituted a quality improvement program with budgeted numbers. At the end of 2019, the management of the corporation requested a report to show the amount saved by the measures taken during the year. The actual sales and actual quality budget costs for2019 are as follows:

2019 Budget

Actual 2019

Sales

$125,000

$150,000

Scrap

3,750

3,750

Rework

5,000

2,500

Training program

1,250

1,500

Consumer complaints

2,500

1,250

Lost sales, incorrect labeling

2,000

--

Test labor

3,000

2,000

Inspection labor

6,250

6,000

Supplier evaluation

3,750

3,250

Required:

a.

Classify each cost as variable or fixed with respect to sales and compute the variable cost ratio based on the budget for 2019.

Be carefulcosts may change because of quality improvement, not cost behavior.

b.

Put the cost activities above into their proper category in the Performance Report with the Actual to Budget numbers for 2019 and the variance from each cost classification.