Analyzing Quality Costs. Management of Merritt Software Services (MSS) has recently implemented a TQM program to eliminate a serious level of "program bugs" that have plagued its recent product releases. The following activities and their costs were taken from MSS's records. The data are for 1996 (the year prior to the \(\mathrm{TQM}\) program) and 1998 (the year after the start of the TQM program).

\section*{Required:}
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 1996 showed an operating loss and 1998 showed a small operating profit, would this change your scenario in Part (2) or confirm it? Explain.

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1996 1998 Design documentation standards development Documentation of customer training process Documentation of changes to software 0 $100,000 0 20,000 5,000 20,000 Customer training. 100,000 130,000 Software testing-customer site 130,000 80,000 Software testing-prerelease 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 0 120,000 Training for systems designers/programmers Training for sales staff.. 100,000 250,000 10,000 80,000