Question

Farber Company produces its product in three departments, Prepping, Machining, and Finishing. A customer recently returned a defective product that had not been machined properly. The company's accountant would classify the repair cost as an internal failure cost.

(A) True
(B) False

Answer 1

The correct answer is (B) False.

Step-by-step explanation:

The company's accountant should have classify the repair cost as an external failure.

Internal failure costs are costs incurred to remove defects found before the customer receives the product or service. External failure costs are costs incurred to remove defects found after the customer receives the product or service.

As the defect was found/reported by customer so repair expense will be classify as external failure.