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Question 7: Which of the following costs of quality is a failure cost?
A. Systems development costs.
B. Costs of inspecting in-process items.
C. Contract penalty for delivery of nonconforming goods.
D. Costs of quality circles.
Correct Answer: C
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Failure costs are incurred after defective output has been removed from production. A contract
penalty for faulty goods is an example of an external failure cost.
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