MANAGING COSTS AND QUALITY

Costs of quality, prepare the costs of quality report

Four kinds of costs of quality

- Internal failure costs: Costs incurred when defective products are detected before leaving the
business.
o Rework, material disposals, downtime, …..
- External failure costs: Costs incurred when defective products are detected after providing to
customers.
o Sales returns, warranty claims, processing of customer complaints, legal costs, ….
- Appraisal costs: costs of determining the existence of the defects.
o Monitoring, testing equipment, salary of quality controllers (inspect the materials,
finished products, …)
- Prevention costs: costs incurred to make sure high-level quality products/ services, preventing
the defects at the beginning
o Planning of quality, quality control system engineering, mechanisms/ procedure to
prevent the defects

Prepare the costs of quality report