CAPM (Certified Associate in Project Management) Practice Exam

What are examples of costs of external failure?

1. Costs incurred during production

2. Failures found by the project team

3. Increased warranty work and lost customers

4. Expenses related to project management

The correct answer is: Increased warranty work and lost customers

External failure costs are costs that are incurred when the product or service reaches the customer and is found to be defective or not meeting the customer's expectations. These costs typically include increased warranty work and lost customers, as mentioned in option C. Option A is incorrect because costs incurred during production would fall under the category of internal failure costs, as these costs are incurred before the product reaches the customer. Option B is incorrect because failures found by the project team, while important to address, do not involve costs incurred by the customer and therefore do not fall under external failure costs. Option D is incorrect because expenses related to project management would fall under the category of prevention costs, as they are incurred in an effort to prevent failures or defects from occurring in the first place. Overall, option C is the best example of costs of external failure as it specifically involves costs incurred by the customer after the product has been delivered to them.