The manager at Rainbow International prepares a Cost of Quality report to report the following expenses:Inspection of raw material costs $7,500Warranty costs warranty claims $250,000Cost to dispose of rejected products $15,000Train hourly manufacturing personnel $50,000Recall of batch #2894 $180,000Production losses due to machine malfunctions $24,000Cost of defective products found at inspection audit $76,000Inspecting products when halfway through the production process $26,000Which of the following total cost is the total cost of quality in the external failure cost category? A) $180,000B) $7,500C) $240,000D) $680,000E) $250,000

E) $250,000

Explanation:

As for the provided information, we know that the External Failure Cost is defined as the cost of meeting the failure in products after sales.

Warranty cost in form of warranty claims = $250,000

Note:

Cost to dispose the rejected products are the cost incurred before sales thus, not part of external failure.

Training is done prior to sales, thus, not an external failure cost.

Recall cost is also not an external failure cost.

Production losses again are incurred before sales.

Defective products are found at inspection stage before sales.

Inspection in between the process of production, thus before sales.

Correct option is:

E) $250,000