A Professor, Dissatisfied with a Product He's Purchased, Bad Mouths

question 26

Multiple Choice

A professor, dissatisfied with a product he's purchased, bad mouths the product to his class, resulting in decreased market share (since the students believe everything he tells them) . The manufacturer suffers:

• A) an internal failure cost.
• B) an external failure cost.
• C) a prevention cost.
• D) an appraisal cost.

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Definitions:

Operating Expenses

Costs related to the day-to-day functions of a business, excluding the cost of goods sold.

Net Income

The amount of money a company earns after all expenses, taxes, and costs have been subtracted from total revenue.

Periodic Inventory System

A method of inventory valuation in which updates to inventory levels and cost of goods sold are made periodically, such as at the end of the fiscal year.

Gross Method

An accounting approach for recording purchases at the invoice’s gross amount without deducting any cash discounts for early payment.