If a Company Were to Increase Its Appraisal Costs by Inspecting

question 7

Multiple Choice

If a company were to increase its appraisal costs by inspecting more units as the units are are in production (during production) , the company's external failure costs would most likely

• A)decrease.
• B)increase.
• C)not be affected.
• D)Unable to predict

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Definitions:

Labor-Hours

Labor-hours amount to the total time workers spend on production or service delivery, an important factor in determining labor efficiency and cost control.

Variable Manufacturing Overhead

Costs that vary with the level of production output, such as supplies and indirect labor expenses, not directly tied to the production volume.

Predetermined Overhead Rate

A calculated rate used to allocate overhead costs to products or cost objects based on a planned level of activity.

Direct Labor-Hours

The aggregate number of hours that workers, who are directly part of producing goods or services, contribute.