If the final inspector at a tractor paint shop discovers that the paint on the tractor has a poor finish, the tractor may have to be completely rescinded and repainted. What type of cost does this situation describe?

Question

Quizplus · Accepted Answer

Internal failure costs are the costs incurred to fix problems that are discovered before the product/service is delivered to the consumer. These costs include scrap, disallowed products, refurbishing defective units, and downtime caused by quality problems. In the above example the cost incurred is an internal failure cost.

If the Final Inspector at a Tractor Paint Shop Discovers