Question

Sanford Corp. bought new technological systems to inspect the quality of products as they come off the production line. The expense of operating these systems would be an example of which of the following types of quality-related costs?a. Internal failure costb. Appraisal costc. Prevention costd. External failure cost

Answer 1

Answer: b. Appraisal cost

Explanation: Appraisal cost, also known as inspection costs, are those costs incurred by a company, as part of the quality control process, to detect defective products before the products are moved to the market, in order to meet consumers' expectations.

This is done because the losses that will be made when defective products are sold, outweigh the appraisal costs.

Therefore, Sanford Corp. has incurred  appraisal cost in buying the new technological systems, knowing that if the quality of the Company's products is not up to consumer standards, the losses that will be incurred will surpass that of the appraisal cost.