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Categories Of Costs

There are four Categories Of Costs:

  • Internal failure costs

(costs associated with defects found before the customer receives the product or service).

  • External failure costs

(costs associated with defects found after the customer receives the product or service)

  • Appraisal costs

(costs incurred to determine the degree of conformance to quality requirements)

  • Prevention costs

(costs incurred to keep failure and appraisal costs to a minimum). The failure costs contribute major expenses whereas appraisal cost is the second level when compared for expenses. Prevention costs have least expenses. The costs of activities specifically designed to prevent poor quality in products or services. The following table indicates elements that may be included in the four major cost categories:

Applicant screening Equipment repair

Job descriptions

Procedure reviews


Capability studies

Field testing

Market analysis

Procedure writing

Time and motion studies

Controlled storage

Fixture design and fabrication

Personnel reviews

Prototype testing


Design reviews


Pilot projects

Quality design

Vendor evaluation

Equipment maintenance



Safety reviews

Vendor surveys

Appraisal costs:

The costs, associated with measuring, evaluating, or auditing products/services to ensure conformance to quality standards and performance requirements.


In-process inspection

Personnel testing

Document checking

Inspection and test

Procedure checking

Drawing checking

Inspection and test reporting

Prototype inspection

Equipment calibration

Laboratory testing

Receiving inspection

Final inspection

Other expense reviews

Shipping inspection