Situation: Maria's Seltzer Broth produces a wide array of ready-made carbonated soups. Be sure to look for the hand-labeled cans at your local grocer! But, labeling cans by hand frequently causes errors, and customers who purchase a can labeled Bubbly Beef sometimes find that the can actually contains Chipper Chicken. The disappointed customers call Maria's hotline, and the support team has to correct the mistake. 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: Maria’s Seltzer Broth produces a wide array of ready-made carbonated soups. Be sure to look for the hand-labeled cans at your local grocer! But, labeling cans by hand frequently causes errors, and customers who purchase a can labeled Bubbly Beef sometimes find that the can actually contains Chipper Chicken. The disappointed customers call Maria’s hotline, and the support team has to correct the mistake. According to The Cost of Poor Quality, what category does this cost belong to?


Explanation: The correct answer is **External failure**. External failure costs refer to the expenses incurred as a result of defects or issues identified after the product has reached the customer. In this scenario, customers who purchase a can labeled Bubbly Beef but find Chipper Chicken inside encounter a discrepancy between the product they expect and what they receive, leading to dissatisfaction and the need for corrective action. The disappointed customers call Maria's hotline, requiring the support team to address the mistake, which incurs additional expenses such as customer service labor, potential refunds or exchanges, and potential damage to the company's reputation. Since the error is detected after the product has left Maria's Seltzer Broth and reached the customers, the associated costs fall under the category of external failure. Internal failure costs, on the other hand, arise from defects identified within the organization's processes or products before they are delivered to the customer. Prevention costs involve investments made to proactively eliminate defects from processes to prevent failures from occurring. Appraisal costs are associated with activities aimed at assessing and evaluating the quality of products or services. Therefore, the cost incurred due to mislabeling cans, leading to customer dissatisfaction and subsequent corrective action, is categorized as an external failure cost according to The Cost of Poor Quality.
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