Cost of Quality

It’s a term that’s widely used – and widely misunderstood. The “cost of quality” isn’t the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service. Every time work is redone, the cost of quality increases. Obvious examples include:

The reworking of a manufactured item.

The retesting of an assembly.

The rebuilding of a tool.

The correction of a bank statement.

The reworking of a service, such as the reprocessing of a loan operation or the replacement of a food order in a restaurant.

In short, any cost that would not have been expended if quality were perfect contributes to the cost of quality.


Total Quality Costs:

As the table below shows, quality costs are the total of the cost incurred by:

Investing in the prevention of nonconformance to requirements.

Appraising a product or service for conformance to requirements.

Failing to meet requirements.

Quality Costs—general description:

Prevention Costs:

The costs of all activities specifically designed to prevent poor quality in products or services.

Examples are the costs of:

New product review

Quality planning

Supplier capability surveys

Process capability evaluations

Quality improvement team meetings

Quality improvement projects

Quality education and training

Appraisal Costs:

The costs associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements.

These include the costs of:

Incoming and source inspection/test of purchased material

In-process and final inspection/test

Product, process or service audits

Calibration of measuring and test equipment

Associated supplies and materials

Failure Costs:

The costs resulting from products or services not conforming to requirements or customer/user needs. Failure costs are divided into internal and external failure categories.

Internal Failure Costs: Failure costs occurring prior to delivery or shipment of the product, or the furnishing of a service, to the customer.

Examples are the costs of:





Material review


External Failure Costs: Failure costs occurring after delivery or shipment of the product and during or after furnishing of a service to the customer.

Examples are the costs of:

Processing customer complaints

Customer returns

Warranty claims

Product recalls

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