Question

Verizon Manufacturing Company spent $400.000 in 2019 to inspect incoming components of the $400,000 $240.000 is found appraisal costs. The variable inspection cost is $0.20 per component it takes two components for each finished product. Internal fallure costs average 580 per filed unit of finished goods in 2019. Sve percent of all completed es had to be worked Eemallure coverage $200 per failed unit. The company's average external failures are one percent of units sold. The company manufactures allunts as ordered and cames no materia inventores. Selong to decreases tal cost of way (COO) Verizon contracted Quality is Free Consultants, Inc. (IFC to study was to improve product quality and to reduce costs Upon completion of the study. OFC recommended auto inspection equipment that requires a 60000 annual cost for training and $150.000 for equipment rental and maintenance. The new equipment will mate $40.000 of the foredrasal cost reducere amount of unacceptable product units in the manufacturing process by 10 percent and cut product falures by hat The company and the consulting from $100.000 in early January 2020 for the project Veron expects no changes operating level in the foreseeable future The $100.000 payment to the consulting firm for cost of Quality Cod reporting purposes is best fied as a Muluple Choice 0 Prevention cost 0 U pricom U nel flore cow O marec 0 o A ve cost

Answer 1

ANSWER: Preventive costs

The $ 100000 consulting fee can best be classified as preventive costs as

it helps to reduce the appraisal costs & failure costs and also

reduces the occurrence of unacceptable products

Preventive costs are for activities undertaken in a planned manner to prevent or reduce to a maximum, the defective products ,

instead of appraising the finished product or repairing them

On the other hand,

appraisal costs are spent towards detecting , if there is ny defect, like quality checks, inspection, ie to inspect, analyse & satisfy , that the units produced , are upto the standard .

Internal failure costs are that spent towards the repairing the defects found in the appraisal stage, re-work , etc.before shipping them to the customer.

External failure costs are undertaken after defects are reported by the customer like warranty-period rework, replacement, etc.