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Chapter 11

5.3 Quality costs

Quality costs are usually categorised into one of four different types.

 Prevention costs – represent the cost of any action taken to prevent or reduce
defects and failures. It includes the design and development of quality control
equipment and the maintenance of the equipment.

 Appraisal costs – he costs incurred, such as inspection and testing, in initially
ascertaining the conformance of the product to quality requirements. They
include the costs of goods inwards inspection, and the monitoring of the
production output.

 Internal failure costs – the costs arising from inadequate quality where the
problem is discovered before the transfer of ownership from supplier to
purchaser. They include the cost of reworking or rectifying the product, the net
cost of scrap, downtime of machinery due to quality problems, etc.

 External failure costs – the cost arising from inadequate quality discovered after
the transfer of ownership from supplier to purchaser such as complaints,
warranty claims, recall costs, costs of repairing or replacing returned faulty
goods, etc.

TQM aims to reduce overall quality costs.

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