Cost of Quality

The cost of quality may be defined as the cost associated with manufacturing high quality products according to the money spent by the customer and the expectation of the customer. Company can eliminate any cost associated with the production of the products that don’t have any quality perceptions from the customer side. This can greatly affect the overall cost and manufacturing process. There are a number of different types of costs that depend upon the degree of quality of the product. Some of these costs are explained as below:-

Prevention Cost

These are the costs that are spent to avoid the overall failure of the product. The costs associated with production plants, staff and employee training, final product testing and supplier assessment costs are the examples of prevention cost.

Appraisal Cost

The cost that is associated with checking and inspection of the final product in order to reduce the risk of sending defective and substandard products to the customers. Examples of these costs include quality control testing, production process analysis and cost associated with equipment testing.

Cost of Internal Failure

These are the costs associated with defective products that are not yet delivered to the customers and were detected prior to customer delivery. The cost associated with rework for removal of defective is the example of this type of cost

Cost of External Failure

The cost of external failure is the cost associated with the defective products that are delivered to customer without checking and control. The example of this kind of cost is lost revenue, loss of customers that will not buy in future, warranty claim management cost, lawsuit settlement costs and related costs.

 

 

Other Related Accounting Articles:

Recommended Books !



Or

Download E accounting book in MS-word format for just 20 $ - Click here to Download


Leave a Reply

Your email address will not be published. Required fields are marked *