Quality costs are the costs associated with preventing, finding, and correcting

defective work. These costs are huge, running at 20% - 40% of sales. Many of the
se costs can be significantly reduced or completely avoided. One of the key func
tions of a Quality Engineer is the reduction of the total cost of quality associ
ated with a product.
Prevention Costs: Costs of activities that are specifically designed to prevent
poor quality. Examples of "poor quality" include coding errors, design errors, m
istakes in the user manuals, as well as badly documented or unmentionably comple
x code.
Appraisal Costs: Costs of activities designed to find quality problems, such as
code inspections and any type of testing.
Failure Costs: Costs that result from poor quality, such as the cost of fixing b
ugs and the cost of dealing with customer complaints.
Internal Failure Costs: Failure costs that arise before your company supplies it
s product to the customer.
External Failure Costs: Failure costs that arise after your company supplies the
product to the customer, such as customer service costs, or the cost of patchin
g a released product and distributing the patch.
Total Cost of Quality: The sum of costs: Prevention + Appraisal + Internal Failu
re + External Failure.
The cost of quality, or total quality cost, is defined as the sum of resources s
pent on prevention plus resources spent on appraisal plus the expenditures and e
conomic impact of failures. The objective of Total Quality Cost is to achieve me
asurable improvement in materiel quality and quality cost reduction on a systema
tic basis. The purpose of the Total Quality Cost Model is to
Provide quality cost information to enable informed, effective decision-making r
elated to cost of quality
Identify failure costs to facilitate appropriate corrective action
Identify appraisal and prevention targets for improvement
Enable results tracking
Identify relationships between improvement actions and results to enable what if a
nalysis