Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Spending on testing a product before shipment to customers is classified as which type of quality cost?

Internal failure cost

External failure cost

Prevention cost

Appraisal cost

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Verified step by step guidance

Understand the concept of quality costs: Quality costs are categorized into four types—Prevention costs, Appraisal costs, Internal failure costs, and External failure costs. Each type represents a different aspect of ensuring or addressing product quality.

Define Appraisal costs: These are costs incurred to inspect, test, and verify that products meet quality standards before they are shipped to customers. The goal is to detect defects before the product reaches the customer.

Differentiate Appraisal costs from other quality costs: Prevention costs are related to activities that prevent defects (e.g., training, process improvements). Internal failure costs arise from defects found before delivery (e.g., rework). External failure costs occur when defects are found after delivery (e.g., warranty claims). Appraisal costs focus on testing and inspection during production.

Relate the problem to Appraisal costs: Spending on testing a product before shipment aligns with the definition of Appraisal costs because it involves verifying product quality to prevent defective items from reaching customers.

Conclude the classification: Based on the explanation, testing a product before shipment is classified as an Appraisal cost, as it is part of the quality assurance process to ensure compliance with standards.