Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 7

Which of the following is an example of a nonfinancial internal failure quality cost?

Answer options

• A. Decreasing gross profit margins over time.
• B. Foregone contribution margin on lost sales.
• C. Defective units shipped to customers.
• D. Excessive time to convert raw materials into finished goods.

Correct answer: D

Explanation

The correct answer, D, illustrates a nonfinancial internal failure cost as it highlights inefficiencies in the production process. Options A and B relate to financial impacts, while option C pertains to external failures that affect customer satisfaction.