Situation: Charlie's Pressurized Cottage Cheese Company sells soft cheese products in aerosol cans, making it easy for their customers to put copious amounts of cheese onto fruit, granola, or directly into their mouths. Yum! Unfortunately, the cans occasionally explode in the warehouse before they can be sold to customers. According to The Cost of Poor Quality, what category does this cost belong to?

Internal failure

External failure

Appraisal

Prevention


Choose an option to see if it’s correct. Check the explanation below.

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Explanation: Situation: Charlie’s Pressurized Cottage Cheese Company sells soft cheese products in aerosol cans, making it easy for their customers to put copious amounts of cheese onto fruit, granola, or directly into their mouths. Yum! Unfortunately, the cans occasionally explode in the warehouse before they can be sold to customers. According to The Cost of Poor Quality, what category does this cost belong to?


Explanation: The correct answer is **Income statement**. An income statement, also known as a profit and loss statement, is an accounting tool used to report on revenue and expenses over a period of time, typically quarterly or annually. It provides a summary of a company's financial performance by detailing its revenues, expenses, gains, and losses, allowing stakeholders to assess the profitability and operational efficiency of the business. Unlike the other options listed, an A3 Template is a problem-solving and continuous improvement tool used to address specific issues within a company, while the cash flow statement focuses on the movement of cash in and out of a business during a specific period and the balance sheet provides a snapshot of a company's financial position at a specific point in time by listing its assets, liabilities, and equity. Therefore, the income statement is the most appropriate accounting tool for reporting revenue and expenses over a period of time.
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