Final answer:
Costs resulting from defects before delivery to the customer are known as internal failure costs, which include expenditures such as rework, retesting, and scrapping defective products.
Step-by-step explanation:
The costs incurred by defects that occur prior to delivery to the customer are called internal failure costs. These costs are associated with the detection and correction of defective products before they are shipped to customers. They are part of the quality costs or cost of poor quality, which also include prevention costs, appraisal costs, and external failure costs. In contrast to internal failure costs, external failure costs arise after the product has been delivered to the customer. Internal failure costs may include rework, retesting, and scrapping defective products.