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CMA Intermediate · Operations Management and Strategic Management · Productivity Management and Quality Management

Which of the following is classified as an external failure cost in the cost of quality approach?

Replacing goods returned by customers under warranty is an external failure cost, because the defect is discovered after delivery to the customer. In-house scrap is internal failure, inspection salaries are appraisal cost, and training is a prevention cost.

  1. ACost of replacing goods returned by customers under warrantyCorrect
  2. BCost of scrap found during in-house final inspection
  3. CSalaries of the incoming material inspectors
  4. DCost of operator training in statistical process control

Explanation

External failure costs arise after the defective product reaches the customer, such as warranty replacements, returns and complaint handling. Scrap found in-house is internal failure, inspector salaries are appraisal, and SPC training is prevention cost.

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