Question

Which of the following describes costs that support activities whose purpose is to reduce the number of defects?

a) Preventive costs
b) Variable costs
c) Overhead costs
d) Fixed costs

Answer 1

Preventive costs are intended to reduce defects and are a type of quality cost in production. Fixed costs, or overhead, when spread across a greater quantity of output, lead to a decrease in the average fixed cost per unit, represented by a downward-sloping curve.

Step-by-step explanation:

The costs that support activities with the purpose of reducing the number of defects are known as preventive costs. These are part of the quality costs in business management or production and are incurred to prevent potential defects or issues, ideally lowering overall costs by avoiding the expense of failures.

On a different note, regarding fixed costs, a common name for it is "overhead." When you divide fixed cost by the quantity of output produced, you obtain the average fixed cost. Suppose the fixed cost is $1,000, the average fixed cost curve decreases as production increases, which is a visual representation of "spreading the overhead." This concept describes the process of allocating fixed costs over a larger number of units produced, effectively reducing the cost per unit.