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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 



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Subject to Moderate