Which cost category includes costs of rework discovered after the product has been delivered to the customer?

Which cost category includes costs of rework discovered after the product has been delivered to the customer?

• A. Internal Failure Costs
• B. Prevention Costs
• C. Appraisal Costs
• D. External Failure Costs

Answer: (A)

The key idea is that costs of quality are classified by when the defect is found and where the cost to fix it is incurred. When a defect is discovered after the product has been delivered to a customer, the costs to fix that defect happen outside the producer’s plant and after sale. Those post-delivery repairs, warranty work, returns processing, and field-service expenses fall under external failure costs. They represent the impact of defects felt by the customer and typically are the most costly because they involve customer dissatisfaction and additional service efforts after the product has left the organization. In contrast, internal failure costs are incurred from defects found before delivery—things like rework, scrap, or failure analysis done within the production process. Prevention costs aim to stop defects from occurring in the first place, and appraisal costs cover inspection and testing to detect defects before delivery. So rework needed after delivery is categorized as external failure costs, since the defect was detected outside the production environment.

The key idea is that costs of quality are classified by when the defect is found and where the cost to fix it is incurred. When a defect is discovered after the product has been delivered to a customer, the costs to fix that defect happen outside the producer’s plant and after sale. Those post-delivery repairs, warranty work, returns processing, and field-service expenses fall under external failure costs. They represent the impact of defects felt by the customer and typically are the most costly because they involve customer dissatisfaction and additional service efforts after the product has left the organization.

In contrast, internal failure costs are incurred from defects found before delivery—things like rework, scrap, or failure analysis done within the production process. Prevention costs aim to stop defects from occurring in the first place, and appraisal costs cover inspection and testing to detect defects before delivery. So rework needed after delivery is categorized as external failure costs, since the defect was detected outside the production environment.