At Scorla Automobiles, a few machines in the assembly section were faulty and had to be shut down till they were repaired. This reduced the output of automobiles for the quarter. In this case, the costs incurred by Scorla Automobiles for repairing the machines are an example of _____.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs

Question

Quizplus · Accepted Answer

The costs incurred by Scorla Automobiles for repairing the faulty machines are an example of internal failure costs. These costs are associated with defects that are identified before products leave the facility. In this case, the faulty machines caused a reduction in the output of automobiles, which would have to be rectified before they left the facility.

At Scorla Automobiles, a Few Machines in the Assembly Section