Final answer:
Costs incurred to prevent quality defects in a COQ framework are known as prevention costs. They are part of proactive measures to ensure process quality, distinct from appraisal costs, internal failure costs, and customer-failure costs.
Step-by-step explanation:
In Cost-of-Quality (COQ) reporting, the costs incurred to prevent quality defects from occurring are classified as prevention costs. These costs represent the proactive measures a firm takes to ensure quality in its processes, such as training employees, implementing quality systems, and acquiring high-quality materials. They contrast with appraisal costs (inspection and testing), internal failure costs (costs for defects found before reaching the customer), and customer-failure costs (costs for defects found after reaching the customer).
Understanding various cost measures, including fixed costs, marginal costs, average total costs, and average variable costs, is essential for firms engaged in both short and long-term planning. Fixed costs remain constant regardless of output, while variable costs can change with production levels. Marginal cost is particularly important as it helps firms understand the cost of producing one additional unit of product.