Azure Company uses the multiplier method to estimate hidden quality costs. The multiplier is determined to be 3, based on experience. Accounting records show that the measured external failure costs are $330,000. Which of the following is the total external failure cost?
A)$330,000
B)$110,000
C)$990,000
D)$339,900

Question

Quizplus · Accepted Answer

The total external failure cost is the product of the measured external failure cost and the multiplier. 
Total external failure cost = Measured external failure cost * Multiplier 
Total external failure cost = $330,000 * 3 
Total external failure cost = $990,000

Azure Company Uses the Multiplier Method to Estimate Hidden Quality