Internal failure costs are incurred when a product fails to meet quality standards before it is delivered to the customer. In this scenario, the confectionery product is identified as defective during an internal inspection process (before packaging and shipment). The costs associated with this discovery, such as the cost of scrapping the defective item, reworking it, or re-inspecting it, fall directly into the category of internal failure costs. These costs represent the financial impact of non-conformance detected within the organization's own processes.

B. External failure cost: This type of cost is incurred only after a defective product has been delivered to the external customer (e.g., warranty claims, returns).

C. Prevention cost: These are proactive costs aimed at preventing defects from occurring in the first place, such as quality planning and employee training.

D. Appraisal cost: This is the cost of the inspection activity itself (e.g., inspector's salary, testing equipment), not the cost resulting from finding a defect.

1. Dale, B. G., van der Wiele, T., & van Iwaarden, J. (2016). Managing Quality (6th ed.). Wiley. In Chapter 5, "The Cost of Quality," internal failure costs are defined as "costs arising from inadequate quality which are discovered before the transfer of ownership from supplier to purchaser." Examples provided include scrap, rework, and re-inspection (pp. 104-105).

2. Juran, J. M., & De Feo, J. A. (2010). Juran's Quality Handbook: The Complete Guide to Performance Excellence (6th ed.). McGraw-Hill. Chapter 8, "Quality and Costs," categorizes internal failure costs as those that "would disappear if no defects existed in the product... prior to shipment to the customer." It explicitly lists scrap and rework as primary components of this cost category (Section 8.5).

3. Schiffauerova, A., & Thomson, V. (2006). A review of research on cost of quality models and their integration. International Journal of Quality & Reliability Management, 23(6), 647-661. This peer-reviewed article defines internal failure costs as "costs associated with defects that are found before the customer receives the product or service" (p. 650). DOI: https://doi.org/10.1108/02656710610672470