Internal failure cost
Internal failure costs arise from defects or non-conformance identified before delivery to the external customer. They can include scrap, rework, retesting and disruption, using the chosen reporting boundary. They differ from prevention and appraisal spending because a failure has already occurred. Report physical causes and resource consequences as well as recorded financial cost; an apparently low scrap value may conceal substantial lost bottleneck time.
Worked example
A defective batch is found before dispatch and requires $3,000 rework plus $500 retesting attributable to the failure.
Common mistake
Do not classify a customer warranty repair as internal failure merely because the company’s own staff performs the repair after delivery.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | APM | Direct | September 2026–June 2027 |