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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
Classify the following quality costs as prevention costs, appraisal costs, internal failure costs external failure costs:
- 1. Scrap (created by defective units)
- 2. Certifying a vendor to ensure that quality pans are provided
- 3. Stopping work to control process malfunction
- 4. Replacing a defective product for a customer
- 5. Goods returned because they were defective
- 6. Inspecting a subassembly
- 7. Inspecting and testing prototypes
- 8. Reinspecting a reworked product
- 9. Packaging inspection
- 10. Lost sales because of recalled products
- 11. Recall to repair defective products
- 12. Process acceptance
- 13. Internal audit to ensure that quality guidelines and processes are being followed
- 14. Repairing products in the field
- 15. Providing engineering assistance to selected suppliers to improve their product quality
- 16. Correcting a design error discovered during product development
- 17. Settling a bodily injury lawsuit caused by a defective product
- 18. Customer complaint department
- 19. Quality control circles
- 20. Continuing supplier verification
- 21. Redesigning a product to eliminate a product defect
- 22. Lost sales because of product quality concerns
Categorize the given quality costs.
Quality Cost:
Organizations are required to bear costs due to non-conformity of goods or services with the general specifications. These costs are termed as quality costs. Quality costs can be categorized into preventive costs, detective costs, internal failure costs and external failure costs.
Given quality costs are categorized as follows:
| Quality Costs | Category | |
| 1. Scrap (created by defective units) | Internal failure cost | Quality failure found internally |
| 2. Certifying a vendor to ensure that quality parts are provided | Prevention cost | Ensuring good quality to prevent quality failure |
| 3. Stopping work to control process malfunction | Internal failure cost | Work loss due to process failure |
| 4. Replacing a defective product for a customer | External failure cost | Cost incurred after delivery of product |
| 5. Goods returned because they were defective | External failure cost | Cost incurred after delivery of product |
| 6. Inspecting a subassembly | Detection cost | Cost incurred to maintain quality |
| 7. Inspecting and testing prototypes | Prevention cost | Cost incurred to ensure quality |
| 8. Re-inspecting a reworked product | Internal failure cost | Inspection cost incurred for products that failed quality |
| 9. Packaging inspection | Detection cost | Cost incurred to sort |
| 10. Lost sales because of recalled products | External failure cost | Loss incurred after delivery of products |
| 11... |
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