For Cost of Quality (COQ) reporting purposes, contribution margin of canceled sales orders due to quality deficiency would be classified as:
A) Prevention costs.
B) Appraisal costs.
C) Internal failure costs.
D) External failure costs.
E) A lost sale, not a cost of quality.

Question

Quizplus · Accepted Answer

The contribution margin of canceled sales orders due to quality deficiency would be classified as external failure costs. External failure costs are incurred when a product does not meet customer requirements and results in lost sales or customer dissatisfaction.

For Cost of Quality (COQ) Reporting Purposes, Contribution Margin of Canceled