An example of an external failure cost would be:

Question

Quizplus · Accepted Answer

Product recalls are a clear example of external failure costs because they occur after the product has already been shipped to the customer and can damage the company's reputation and incur significant expenses, such as legal fees and refunds. Adjusting test equipment and process/product design are considered prevention and appraisal costs, respectively, while scrap is an example of internal failure costs.

An Example of an External Failure Cost Would Be