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Categories Of Quality Costs

Posted in Improvement, and Lean Six Sigma

Categories of quality costs
Basically, the cost of quality can be categorized into four types , namely :

1. Internal failure costs Represents costs associated with errors and non- conformance is found before handing it to the customer’s product. These costs will not appear if they are not found error or non- conformance in the product prior to shipment. Examples of internal failure costs are:

• Scrap : the costs for labor , material , and usually the defective product that is economically irreparable .
• Rework : Costs incurred to correct the error ( redo ) the product to meet the specifications defined.
• Failure analysis : Costs incurred to analyze the failure of the product to determine the causes of failure.
• Reinspection and retesting : costs incurred for re-inspection and re-testing products that have undergone rework or repair back .
• Downgrading : the difference between the normal selling price and the reduced price for quality reasons.
• Process avoidable losses : the costs of losing , even though the product was not defective ( konformans ) , for example : the excess weight of the product delivered to the customer because of the variability of measurement equipment , etc .

2. External failure costs are costs associated with errors and non – conformance found after the product is delivered to the customer . These fees will not appear if they are not found error or non – conformance of the product after delivery . examples of external failure costs are :

• Warranty: costs incurred for replacement or restoration product that is still in the warranty period.
• Complaint adjustmen : the costs incurred for the investigation and resolution of complaints relating to defective products.
• Returned product : the costs associated with the acceptance and placement of defective products returned by customers.
• Allowances : the costs associated with the customers’ concessions for products under quality standards that are accepted by the customer or that do not meet the specifications of use.

3. Appraisal costs are costs
associated with determining the degree of conformance to quality requirements ( specifications set ) . Examples of cost assessment are:

• Inspection and testing of the arrival of materials : costs associated with determining the quality of materials purchased , whether through inspections at the time of admission , through inspections at suppliers , or third party inspections conducted.
• Inspection and testing of products in the process : the costs related to the evaluation of the product in the process conformance to quality requirements ( specifications ) set.
• Inspection and testing of the final product : the costs related to the evaluation of the final product conformance to quality requirements ( specifications ) set.
• Product quality audit : fees for auditing the quality of products in the process or final product.
• The accuracy of testing equipment maintenance : the cost of doing the calibration to maintain accuracy of measurement instruments and equipment.
• Evaluation of the stock : the costs associated with the testing of the product in storage to rate the quality degradation.

4. Prevention costs are costs associated with efforts to prevent internal and external failures , thus minimizing the cost of internal and external failure . Examples of costs of prevention are :

• Quality planning : the costs related premises overall quality planning activities , including the preparation of the procedures necessary for the plan to consume quality to all interested parties.
• New products review : the costs related to reliability engineering and other activities associated with quality that relates to the notification of new designs .
• Process control : the cost of inspection and testing process to determine a process ( process capability ) , not the status of the product.
• Audit quality : the costs related to the evaluation of the activities in the plan overall quality.
• Supplier quality evaluation : costs associated with the evaluation of the supplier prior to the selection of suppliers , audits of the activities during the contract , and other businesses related to suppliers.
• Training : costs associated with the preparation and implementation of training programs related to the cost reduction program continuously through improved quality.