Business Management QHT1 Task 1: Cost Analysis of Quality

Business Management QHT1
Task 1



MEMO
To: Supervisor

From:

cc:

Date: 01/11/2023

Re: Cost-Quality Relationship


There are 3 types of costs when quality considerations are made. Those include Prevention
Costs, Appraisal Costs, and Internal Failure Costs & External Failure Costs.

1. Prevention Costs are costs designed to prevent defects and quality issues from
occurring. These costs focus on making sure the quality is built into the product during
the production process. Examples include:

 Training for new hires and current employees
 Implementing processes for quality control during production
 Quality control inspections
 Product Testing to identify potential defects

2. Appraisal costs are to assess and evaluate the quality of the product after production.
While these costs may seem like an additional cost, they are important in identifying
defects, and preventing defective products from reaching customers. Examples of these
costs include:
 Inspections
 Product testing
 Audits

3. Internal and external failure costs are associated with addressing quality issues found
before the customer receives the product (internal) or after the customer has received
the product (external). Examples include:

 Finding defects and reworking/retesting products (internal)
 Waste due to defects (internal)
 Lost production time (internal)
 Warranty claims and repairs (external)
 Product recalls (external)
 Legal fees associated with defects (external)

Evaluating the costs considering the trade-offs within manufacturing a product and/or service.