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?

Answer 1

Available options are:

A. Internal failure cost

B. Appraisal cost

C. Prevention cost

D. External failure cost

Answer:

B. Appraisal cost

Explanation:

The reason is that the appraisal costs are incurred to assess that whether the investment will bring value to the organization in terms of customer loyalty, better cash positions, greater profitability, better quality, etc. The inspection of the quality of the production which also considers the cost of operating the system is actually considering the value the new technology system is generating and is appraisal cost to the company.