Costs incurred after waste has been produced and discharged into the environment are called which type of cost?

Costs incurred after waste has been produced and discharged into the environment are called which type of cost?

• A. Environmental internal failure costs
• B. Environmental external failure costs
• C. Committed cost
• D. Uncontrollable cost

Answer: (B)

Think about failure costs in quality costing. After waste has been produced and released into the environment, any costs the company must bear to address the resulting environmental harm—cleanup, penalties, regulatory fines, remediation—are external failure costs. They arise from a defect that has affected external parties and occurs after the product has left the process. Internal failure costs would be things like rework or scrap found before delivery, so they don’t fit. Committed costs relate to long-term capacity decisions, and uncontrollable costs are about lack of management influence in the short term, not the nature of the failure itself.

Think about failure costs in quality costing. After waste has been produced and released into the environment, any costs the company must bear to address the resulting environmental harm—cleanup, penalties, regulatory fines, remediation—are external failure costs. They arise from a defect that has affected external parties and occurs after the product has left the process. Internal failure costs would be things like rework or scrap found before delivery, so they don’t fit. Committed costs relate to long-term capacity decisions, and uncontrollable costs are about lack of management influence in the short term, not the nature of the failure itself.