What Are External Failure Costs in Quality Management?

Which of the following would be considered an external failure cost?

A. Cost to train personnel

B. Rework costs

C. Warranty costs

D. Cost of inspecting incoming raw materials

Answer:

Warranty costs are considered an external failure cost because they are incurred after the product reaches the customer and are associated with warranty claims. Option C.

In the context of quality management and cost accounting, an external failure cost is a type of cost that occurs when defects are discovered after the customer has received the product or service. Among the options provided, warranty costs (C. Warranty costs) are considered an external failure cost because they are incurred after the sale of the product, when a warranty claim is made by the customer due to a failure in the product's quality or performance. Other options such as cost to train personnel, rework costs, and cost of inspecting incoming raw materials are considered internal failure costs or appraisal costs, which occur before the product reaches the customer.

So option C is correct.