NRL's accounting information system reported warranty repair and product replacement costs totaling $120,000 in a recent accounting period. These costs are an example of which type of quality costs?
A) Internal activity costs
B) External activity costs
C) Appraisal activity costs
D) Prevention activity costs

Question

Quizplus · Accepted Answer

Warranty repair and replacement costs are considered external activity costs because they happen after the product has been sold and delivered to the customer. These costs are incurred as a result of a failure to meet customer expectations and are therefore seen as a cost of poor quality.

NRL's Accounting Information System Reported Warranty Repair and Product Replacement