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ACCA practice exam question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › ACCA practice exam question

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • February 9, 2021 at 3:44 pm #609853
    collinjohn
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Below is the question and answer to an ACCA practice exam, I answered an internal failure cost as it was a faulty product, so the failure happened before purchase. But the answer is external failure cost because it says the failure occurred after purchase. But if the product is faulty then the failure happened before purchase, right? Anyways any clarification on this will be helpful.

    A customer returns a faulty product to a firm for repair under a warranty scheme. The firm operates a total quality management system.

    Which of the following best describes the cost of the repair?

    A prevention cost
    An appraisal cost
    An external failure cost
    An internal failure cost
    Correct Answer

    An external failure cost

    As the failure occured after the customer had received the product, the repair is an external failure cost.

    February 10, 2021 at 9:08 am #609886
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    An internal fault cost is where the problem is discover before the product is sold to the customer, so there is the cost of reworking the product or scraping it etc.. So customers still end up with a ‘good’ product. The customer is not affected b the problem.

    External failure costs are where the problem is discovered after it has been sold to the customer. So there is the cost of replacing it, or refunding the money, and importantly the possible cost of lost future sales because the customer loses trust in the company. The customer is affected by the problem.

    February 10, 2021 at 10:14 am #609900
    collinjohn
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    That makes sense! Thank you for the clarification.

    February 10, 2021 at 10:53 am #609912
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome 🙂

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  • The topic ‘ACCA practice exam question’ is closed to new replies.

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