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Management of Ellen Software Services (ESS) has recently implemented a TQM program to eliminate a serous level of "program bugs" that plagued its recent product releases. The following activities and their costs were taken from ESS's records. The data are for 2019 (the year prior to the TQM program) and 2021 (the year after the start of the TQM program). 2019 2021 100,000 Design documentation standards development Documentation of customer training process Documentation of changes to software Customer training Software testing - Customer site Software - testing - pre-release Telephone "on-line" customer problem support Software corrections and redesign Field "trouble shooting" for customer support Costs of Contract cancellations Revenues lost due to delivery date delays Training for systems designers/programmers Training for sales staff 0 0 5,000 100,000 130,000 50,000 90,000 50,000 140,000 180,000 0 100,000 10,000 20,000 20,000 130,000 80,000 140,000 60,000 20,000 80,000 30,000 120,000 250,000 80,000 Requirements: 1. Categorize the costs of quality for both years. 2. Evaluate the two years. Develop a scenario to explain the major differences in costs between the two years. In other words, what happened? 3. If 2019 showed an operating loss and 2021 showed a small operating profit, would this change your scenario in question no. 2 or confirm it? Explain.

Management of Ellen Software Services (ESS) has recently implemented a TQM program to eliminate a serous level of "program bugs" that plagued its recent product releases. The following activities and their costs were taken from ESS's records. The data are for 2019 (the year prior to the TQM program) and 2021 (the year after the start of the TQM program). 2019 2021 100,000 Design documentation standards development Documentation of customer training process Documentation of changes to software Customer training Software testing - Customer site Software - testing - pre-release Telephone "on-line" customer problem support Software corrections and redesign Field "trouble shooting" for customer support Costs of Contract cancellations Revenues lost due to delivery date delays Training for systems designers/programmers Training for sales staff 0 0 5,000 100,000 130,000 50,000 90,000 50,000 140,000 180,000 0 100,000 10,000 20,000 20,000 130,000 80,000 140,000 60,000 20,000 80,000 30,000 120,000 250,000 80,000 Requirements: 1. Categorize the costs of quality for both years. 2. Evaluate the two years. Develop a scenario to explain the major differences in costs between the two years. In other words, what happened? 3. If 2019 showed an operating loss and 2021 showed a small operating profit, would this change your scenario in question no. 2 or confirm it? Explain.

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter9: Operating Activities
Section: Chapter Questions
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Management of Ellen Software Services (ESS) has recently implemented a TQM program to eliminate a serous level of "program bugs" that plagued its recent product releases. The following activities and their costs were taken from ESS's records. The data are for 2019 (the year prior to the TQM program) and 2021 (the year after the start of the TQM program). 2019 2021 Design documentation standards development 100,000 Documentation of customer training process 20,000 Documentation of changes to software 5,000 20,000 Customer training 100,000 130,000 Software testing - Customer site 130,000 80,000 Software – testing – pre-release 50,000 140,000 Telephone "on-line" customer problem support 90,000 60,000 Software corrections and redesign 50,000 20,000 Field "trouble shooting" for customer support 140,000 80,000 Costs of Contract cancellations 180,000 30,000 Revenues lost due to delivery date delays 120,000 Training for systems designers/programmers 100,000 250,000 Training for sales staff 10,000 80,000 Requirements: 1. Categorize the costs of quality for both years. 2. Evaluate the two years. Develop a scenario to explain the major differences in costs between the two years. In other words, what happened? 3. If 2019 showed an operating loss and 2021 showed a small operating profit, would this change your scenario in question no. 2 or confirm it? Explain.
Transcribed Image Text:Management of Ellen Software Services (ESS) has recently implemented a TQM program to eliminate a serous level of "program bugs" that plagued its recent product releases. The following activities and their costs were taken from ESS's records. The data are for 2019 (the year prior to the TQM program) and 2021 (the year after the start of the TQM program). 2019 2021 Design documentation standards development 100,000 Documentation of customer training process 20,000 Documentation of changes to software 5,000 20,000 Customer training 100,000 130,000 Software testing - Customer site 130,000 80,000 Software – testing – pre-release 50,000 140,000 Telephone "on-line" customer problem support 90,000 60,000 Software corrections and redesign 50,000 20,000 Field "trouble shooting" for customer support 140,000 80,000 Costs of Contract cancellations 180,000 30,000 Revenues lost due to delivery date delays 120,000 Training for systems designers/programmers 100,000 250,000 Training for sales staff 10,000 80,000 Requirements: 1. Categorize the costs of quality for both years. 2. Evaluate the two years. Develop a scenario to explain the major differences in costs between the two years. In other words, what happened? 3. If 2019 showed an operating loss and 2021 showed a small operating profit, would this change your scenario in question no. 2 or confirm it? Explain.
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