Which of the following is most likely to be categorized as an external failure cost?
A)the cost of testing a product before shipment
B)the cost of machinery maintenance to avoid breakdowns during production
C)the cost of lost future sales after a customer finds a defect in a product
D)the cost of inspection of materials to be used in production

Question

Quizplus · Accepted Answer

External failure costs are costs incurred after the goods or services have been produced and delivered to the customer. Option C, which mentions the cost of lost future sales after a customer finds a defect in a product, is the best example of an external failure cost. Options A, B, and D all refer to prevention or appraisal costs that are incurred before the product is delivered to the customer.

Which of the Following Is Most Likely to Be Categorized