University:
Kentucky State University
Course:
ECO 301 | Microeconomics
Academic year:

2023
Views:

309

Pages:

6
Author:

ViatDithDuada3f3

2-66 Learning Objective 9 (Appendix 2B) Identify the four types of quality costs and explain how they interact. . 2-67 Quality of Conformance When the overwhelming majority of products produced conform to design specifications and are free from defects. . 2-68 Prevention and Appraisal Costs Prevention Costs Support activities whose purpose is to reduce the number of defects Appraisal Costs Incurred to identify defective products before the products are shipped . 2-69 Internal and External Failure Costs Internal Failure Costs Incurred as a result of identifying defects before they are shipped External Failure Costs Incurred as a result of defective products being delivered to customers . 2-70 Examples of Quality Costs Prevention Costs • Quality training • Quality circles • Statistical process control activities Internal Failure Costs • Scrap • Spoilage • Rework Appraisal Costs • Testing & inspecting incoming materials • Final product testing • Depreciation of testing equipment External Failure Costs • Cost of field servicing & handling complaints • Warranty repairs • Lost sales . 2-71 Distribution of Quality Costs When quality of conformance is low, total quality cost is high and consists mostly of internal and external failure. Total quality costs drop rapidly as the quality of conformance increases. Companies reduce their total quality costs by focusing their efforts on prevention and appraisal because the cost savings from reduced defects usually overwhelm the costs of additional prevention and appraisal. Total quality costs are minimized when the quality of conformance is slightly less than 100%. .

Identify the Four Types of Quality Costs and Explain How They Interact

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