[amp_mcq option1=”stocking costs” option2=”stock-out costs” option3=”costs of quality” option4=”shrinkage costs” correct=”option3″]<\/p>\n
The correct answer is C. costs of quality.<\/p>\n
Costs of quality are the costs incurred by a company in order to ensure that its products meet the quality standards that it has set for itself. These costs can be divided into four categories: prevention costs, appraisal costs, internal failure costs, and external failure costs.<\/p>\n
Prevention costs are the costs incurred in order to prevent defects from occurring in the first place. These costs include activities such as quality planning, quality training, and quality improvement.<\/p>\n
Appraisal costs are the costs incurred in order to identify defects that have already occurred. These costs include activities such as inspection, testing, and auditing.<\/p>\n
Internal failure costs are the costs incurred when defects are detected before the product is shipped to the customer. These costs include costs of rework, scrap, and downtime.<\/p>\n
External failure costs are the costs incurred when defects are detected after the product has been shipped to the customer. These costs include costs of customer returns, warranty claims, and lost goodwill.<\/p>\n
The cost of product failure, error prevention and appraisals can be classified under the costs of quality category. This is because these costs are incurred in order to ensure that the company’s products meet the quality standards that it has set for itself.<\/p>\n
Stocking costs are the costs incurred in order to hold inventory. These costs include the costs of storage, insurance, and obsolescence.<\/p>\n
Stock-out costs are the costs incurred when a company is unable to meet customer demand due to a lack of inventory. These costs include the costs of lost sales, lost customers, and damage to the company’s reputation.<\/p>\n
Shrinkage costs are the costs incurred due to loss or damage of inventory. These costs include the costs of theft, shoplifting, and damage due to fire, water, or other hazards.<\/p>\n","protected":false},"excerpt":{"rendered":"
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