The Four Categories of Quality Costs in a Quality Cost

question 35

Multiple Choice

The four categories of quality costs in a quality cost report are:

• A) external failure, product liability, prevention, and carrying.
• B) external failure, internal failure, prevention, and appraisal.
• C) warranty, product liability, prevention, and appraisal.
• D) warranty, product liability, training, and appraisal.

Recognize the importance of the separate entity assumption in financial reporting.

Understand the significance of the continuity assumption in preparing financial statements.

Understanding corporate social responsibility beyond profit margins.

Recognizing the importance of ethics and moral standards in society.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered, which should not factor into future business decisions.

Future Decisions

Choices or judgements that will be made in an upcoming period, often based on past and present information and forecasts.

Overhead Allocation

The process of spreading out fixed costs, such as salaries and utilities, across different departments or production activities within a company.

Product Cost Distortion

The inaccurate allocation of production costs to products, potentially leading to misleading cost information and pricing decisions.