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Chapter 13

1.2 Quality-related costs

 The costing system should be capable of identifying and collecting quality cost
information.

Four types of
quality cost

Conformance costs Non-conformance costs

PREVENTION: APPRAISAL: INTERNAL EXTERNAL
FAILURE: FAILURE:
Cost of Cost of quality
preventing inspection and Costs arising Costs arising
defects before testing, e.g. from a failure to from a failure to
they occur, e.g. inspection of meet quality meet quality
employee incoming supplies standards. standards.
training, design Occurs before Occurs after
costs product has product has
reached reached
customer, e.g. customer, e.g.
cost of reworking cost of lost
products goodwill

 KPIs should be based on the costs of quality and used as the basis for staff
rewards.

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