CPIM Practice Exam

Which category of costs refers to problems found before the product reaches the customer?

1. External failure costs

2. Internal failure costs

3. Prevention costs

4. Quality costs

The correct answer is: Internal failure costs

The category of costs that pertains to problems identified before the product reaches the customer is internal failure costs. This type of cost arises when defects are discovered during the manufacturing process or prior to delivery, leading to expenses related to rework, scrap, or any other corrective actions taken to address the issues. Internal failure costs highlight inefficiencies in the production process that could ultimately impact the quality of the end product, but they do so before the product is delivered to the customer. In the context of quality management, identifying and addressing these costs is crucial because it allows organizations to improve their processes and reduce future occurrences of defects. By focusing on internal failure costs, businesses can enhance their overall quality control efforts and ensure that only products meeting the required standards are shipped to customers. This proactive approach can lead to greater customer satisfaction and loyalty.