Cari and Jeremy just bought a bed and breakfast inn at a very attractive price. The business had been doing poorly. Before they reopened the inn for business, they attended a seminar on operating a high-quality business. Now that they are ready to open the inn, they need some advice on quality costs and the management and control of quality.

Required:

1. Identify and define each of the four categories in a typical Cost-of-Quality (COQ) reporting system.

2. For the identified business (bed and breakfast) provide three examples of costs within each of the four COQ categories.