Question

For Cost of Quality (COQ) reporting purposes, contribution margin of canceled sales orders due to quality deficiency would be classified as:

A. Prevention costs.
B. Appraisal costs.
C. Internal failure costs.
D. External failure costs.
E. A lost sale, not a cost of quality.

Answer 1

The contribution margin of canceled sales orders due to quality deficiency would be classified as Internal failure costs for Cost of Quality (COQ) reporting purposes.

Step-by-step explanation:

The contribution margin of canceled sales orders due to quality deficiency would be classified as Internal failure costs for Cost of Quality (COQ) reporting purposes.

Internal failure costs are the costs associated with defects discovered before the product is delivered to the customer. These costs include the reworking or scrapping of defective products, as well as any associated material or labor costs.

Since the canceled sales orders are a result of quality deficiency, they represent a failure in meeting quality standards and are therefore considered as internal failure costs.