The cost incurs for defective products, after their shipment to customers is classified as ___________?
Correct answer: B. external failure costs
- A. prevention costs
- B. external failure costs
- C. appraisal costs
- D. internal failure costs
Explanation
A defect discovered after shipment has reached the customer, so its cost is an external failure cost. Internal failure costs arise when defects are found before delivery to customers.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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