The Costs That Follow Appeared on the Quality Cost Report

question 52

Multiple Choice

The costs that follow appeared on the quality cost report of Big Beez Company: $\begin{array} { | l | r | } \hline \text { Quality training } & \$ 60,000 \\\hline \text { Customer complaints } & 7,000 \\\hline \text { Warranty costs } & 20,000 \\\hline \text { Production stoppages from machine breakdowns } & 9,000 \\\hline \text { Raw-materials inspection } & 12,000 \\\hline\end{array}$ The sum of Big Beez's prevention and external failure costs is:

• A)$80,000.
• B)$87,000.
• C)$92,000.
• D)$99,000.
• E)$108,000.

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Definitions:

Shut Down

A short-term decision by a firm to cease production due to market conditions, typically because the market price is below the minimum of average variable costs.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating profitability beyond normal returns.

Long-run

A period of time in which all factors of production and costs are variable, allowing companies to adjust to market changes completely.

Perfectly Competitive

Describes a market structure where many firms offer identical products, there are no barriers to entry or exit, and all firms are price takers, meaning they accept the market price as given.