Answer (C) is correct . Nonconformance costs include internal and external failure costs. External failure costs include environmental costs, e.g., fines for violations of environmental laws and loss of customer goodwill.
Answer (A) is incorrect because Systems development costs are prevention (conformance) costs.
Answer (B) is incorrect because Costs of inspecting in-process items are appraisal (conformance) costs.
Answer (D) is incorrect because Costs of quality circles are prevention (conformance) costs.
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