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

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

Financial Accounting

6. Internal Controls and Reporting Cash

Fraud and the Fraud Triangle

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Multiple Choice

Warranty costs and customer complaints are examples of which type of quality cost?

Prevention costs

Internal failure costs

Appraisal costs

External failure costs

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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 managing and addressing quality issues in a business.

Define External failure costs: These are costs incurred when a product or service fails after it has been delivered to the customer. Examples include warranty claims, product recalls, and handling customer complaints.

Relate warranty costs and customer complaints to External failure costs: Warranty costs arise when a company has to repair or replace defective products under warranty, and customer complaints often indicate dissatisfaction due to product or service failures. Both occur after the product has reached the customer, making them External failure costs.

Differentiate External failure costs from other types: Prevention costs are incurred to avoid defects (e.g., training, process improvements). Appraisal costs are related to inspecting and testing products before delivery. Internal failure costs occur when defects are identified before the product reaches the customer (e.g., rework, scrap). External failure costs, however, are post-delivery costs.

Conclude that warranty costs and customer complaints are examples of External failure costs because they represent expenses incurred due to product or service issues after delivery to the customer.