Your Ask Joey ™ Answer

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:

Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner