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What are the costs of quality?

There are four different costs of quality that you should understand:

Prevention costs – Incurred to avoid quality problems.

Appraisal costs – Incurred to measure and monitor activities related to quality.

Internal failure costs – Incurred to remedy defects discovered before the product or service is delivered to the customer

External failure costs – Incurred to remedy defects discovered by customers.

The goal is to understand how costs of quality impact the company’s overall bottom line. A company could spend a ton on preventive and appraisal costs, but that could significantly outweigh the internal and external failure costs. 

The video below contains an explanation and goes through an example on the topic:

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