Which type of costs includes scrap and machine repair?

Internal failure costs refer to expenses incurred when a product fails to meet quality standards before it is delivered to the customer. This category of costs includes expenses such as scrap, which refers to material that cannot be used due to defects and needs to be discarded, and machine repair, which may be necessary if equipment malfunctions due to poor quality output or processes. These costs are associated with failures that occur within the production process, highlighting inefficiencies or problems that arise before the product reaches the consumer.

Understanding internal failure costs is crucial for organizations aiming to improve their quality management systems, as reducing these costs can directly enhance overall operational efficiency and profitability. By addressing issues that lead to scrap and machine repairs, companies can minimize waste and maximize resource utilization, ultimately leading to better product quality and improved customer satisfaction.