quality costs

Quality Cost

The expenses a company incurs to improve the quality of its products. Quality is the state of being superior to something else. For example, if a company uses a more durable raw material to make its products, the material is usually more expensive, which causes the company to incur a quality cost. However, poor quality can also result in costs. For example, customers may complain about defective products that may be replaced for free, which costs the company lost revenue.
Quality costsclick for a larger image
Fig. 74 Quality costs.

quality costs

the costs which are incurred by a firm in ensuring that its products meet customers' QUALITY requirements. Quality costs fall into three main categories.

First, prevention costs which are the costs of pre-production activities aimed at preventing defects (these include the determination of quality requirements and specifications, the creation of quality planning procedures and quality assurance systems aimed at achieving the quality objective, the training of operatives, etc).

Second, appraisal costs which are the costs associated with the evaluation of materials, processes, products and services to ensure that they conform to pre-determined specifications.

Third, failure costs which are the costs incurred when defective products are made. Failure costs themselves include both internal failure costs (costs of scrap, re-working and machine downtime) and external failure costs (warranty charges, re-turned goods and allowances).

Figure 74 depicts the relationship between the costs of prevention, appraisal and failure, and the ability of the firm to meet customers' quality requirements. When the ability to provide a quality acceptable to customers is low, quality costs are typically high, largely because of failure costs. As ability is improved by a greater investment in prevention and appraisal, failure costs can be reduced significantly leading to a marked fall in total quality costs.

References in periodicals archive ?
Quality costs may be summarized by division, by facility, by department, or by shop.
This means that the increase of quality costs for human resources with approximately 51.55 lei will increase the number of tourists accommodated in Alpha Hotel by one.
First, to understand how quality costs affect the lab, it is important to recognize that there are both good and poor quality costs.
Description : Improvement lo the storm water/drainage will eorreet nuisanee flooding, corrective maintenance, infrastructure replacement and upgrade, and water quality costs. The City is faced with increasing state and federal requirements for management of storm water runoff.
Quality Costs are not only an absolute measure of performance, its importance lies in indicating where it will be most beneficial corrective action for the company, and are used as indicators of the business areas for improvement in their products and processes.
Principles of quality costs; financial measures for strategic implementation of quality management, 4th ed.
Unfortunately, the quality costs only focus on the cost to the organization.
What do we know about quality costs? They allow for that somehow in the overheads don't they?
Measuring Quality Costs has been emphasized as an important part of quality improvement efforts since the early 1950's.
There are many research made and publications published related with quality cost. It is identified the efforts between quality cost and value by classifying the quality cost elements into "value added" and "non-value added" grounded on activity based costing (ABC); prevention-appraisal costs are value-added quality costs and failure costs are nonvalue added quality costs [7].
However, quality costs and this swanky light weighs in at a whopping pounds 469!
Quality costs. If we want to go from top six to top three then he is the type of player we should be concentrating on - young, skilful, hard working, with a good work ethic and a will to be successful.

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