Final answer:
Scrap is not considered an external failure cost, as it deals with products discarded before reaching the customer, whereas external failure costs occur after delivery. Costs to society, such as social costs, involve broader impacts, like pollution, and are related to externalities. The correct option is C.
Step-by-step explanation:
In the context of quality management and cost control, external failure costs are those expenses that occur after a defective product or service has been delivered to the customer. These costs may include, among other things, warranty claims, returns, complaints, and lost sales due to damaged reputation or lost goodwill.
However, 'scrap' is typically not considered an external failure cost but rather an internal failure cost because it pertains to defective products that are discarded before they reach the customer.
Costs to society, in the form of social costs, refer to the broader impact on third parties not directly involved in the transaction, for instance, environmental pollution caused by a company's operations. It is important to distinguish between these types of costs for effective business management and operational strategy.