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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 

 

 Surveys 

 Capability  studies    

Field testing 

 

 Market  analysis 

 

Procedure writing 

 

Time and motion  studies 

 Controlled  storage    

 Fixture design and  fabrication 

 

 Personnel  reviews 

 

Prototype testing 

 

 Training 

 Design reviews    

Forecasting 

 

 Pilot  projects 

 

 Quality  design 

 

 Vendor  evaluation 

 Equipment  maintenance   

Housekeeping 

 

Planning 

 

 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.

 

 

Audits 

 

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