Costs of Quality (Pt II)

Question 1

What are the 4 costs of quality?

Answer 1

Prevention costs
The cost incurred in the process to reduce the potential for defects and errors. (Quality Improvement Costs, Quality Training, Planning)

Appraisal costs
The cost of determining the current quality of the production process or service. (Inspection costs)

Internal failure costs
The cost incurred when defects and errors are found before delivery to the customer.

External failure costs
The cost of trying to correct defects and errors after the product or service is delivered to the customer.

Question 2

Describe the cost of quality curve

Answer 2

Cost of service defects decreases with amounts spent on quality improvement.

Cost of quality management increases with amounts spent on quality improvement.

These together create a v-shaped Total Cost of Quality curve.

Question 3

Describe a quality cost report, trend chart

Answer 3

This report analyzes overall trend in the quality program by showing quality costs as a percentage of sales against time.

Chart 1: Total Quality Costs
X - year or month
Y - percentage of sales

Chart 2: Trend of each quality cost category
X - year or month
Y - percentage of sales split between prevention, appraisal, internal failure, and external failure

Question 4

Describe a quality cost report, executive summary

Answer 4

An executive summary report showing the trend of all cost categories and summaries.

6 Charts on One Page

1. Total quality costs (monetary figure)
2. Prevention
3. Appraisal
4. Internal
5. External
6. Quality cost as % of sales

Question 5

Describe a quality cost report

Answer 5

Table-report showing prevention, appraisal, internal, and external failure costs.

Each failure type has sub-categories (ex. quality training, customer complaints).

Each failure type is paired on the table with “quality costs” and “percentage of sales”.

Question 6

Describe a quality cost report, comparison

Answer 6

Table-report showing prevention, appraisal, internal, and external and failure costs for two years expressed as by amount & percentage of sales.

Question 7

Describe a quality cost report, interim standard report

Answer 7

Report showing details of all failure categories and comparing actual and budgeted costs, with a column for variance.

Question 8

Describe a cost-benefit analysis

Answer 8

Helps to appraise the real cost and benefits for a project.

A table with cost categories and benefit categories in the first column, comparing to the right with initial cost, year 1 cost and benefits, year 2 cost and benefits, and totals.