Quality Costing

3.14 Introduction Quality Concept: Quality can be defined as all the features of a product or service
which satisfy the needs of consumer and producer.
According to Harvard Business School, “Quality is more than making a good product. So, quality must be
defined by customer needs in product design (what are the products and services they want?), as well as
by how well the product satisfies those needs.”
Quality Costing: It is a management tool and technique for maintaining quality production and focus on
expenses which are non value added.
Quality costing technique is related to prevent, detect and improve the issues as well as upgrade the
perceived value of the product or service. It is method which focus on the expectation of consumers to
avail them good quality product and services with the use of quality processes and system.
According to Philip Crosby, “It is a powerful tool to raise awareness of the importance of quality. It
referred to the measure as the "price of non conformance" and the organizations choose to pay for poor
quality.”
According to Armand Feigenbaum, “Quality costing is defined as an effective system for integrating the
product and service development, quality maintenance and quality improvement efforts of the various
groups in an organization so as to deliver products and services at the most economical levels, which
allow full customer satisfaction.”
3.15 Taxonomy of costs of Quality Costs of quality have two constituents which are as follow:
1. Costs of Conformance
(a) Prevention Costs: Prevention costs relate to the expenses of an activity taken to avoid or diminish the
shortcoming and failures. For example, cost incur on customer surveys, training to employees, product
designing and improvement, and preparation of quality reports etc.
(b) Appraisal Costs: The expenses incur to inspect, test and establish the conformance to determine the
product quality is known as appraisal costs. For example, costs involve in auditing and monitoring of
product quality and equipment testing and supervision etc.
2. Costs of Non conformance
(a) Costs of Internal failure: Cost arises due to poor quality of the product or services before handover
them to consumers are known as the costs of internal failure such as cost of modification of the product or
service, idle time cost and cost of discarding the defective products etc.
Quality Costing 3.14 Introduction Quality Concept: Quality can be defined as all the features of a product
or service which satisfy the needs of consumer and producer. According to Harvard Business School,
“Quality is more than making a good product. So, quality must be defined by customer needs in product
design (what are the products and services they want?), as well as by how well the product satisfies those
needs.” Quality Costing: It is a management tool and technique for maintaining quality production and
focus on expenses which are non value added. Quality costing technique is related to prevent, detect and
improve the issues as well as upgrade the perceived value of the product or service. It is method which
focus on the expectation of consumers to avail them good quality product and services with the use of
quality processes and system. According to Philip Crosby, “It is a powerful tool to raise awareness of the
importance of quality. It referred to the measure as the "price of non conformance" and the organizations
choose to pay for poor quality.” According to Armand Feigenbaum, “Quality costing is defined as an
effective system for integrating the product and service development, quality maintenance and quality
improvement efforts of the various groups in an organization so as to deliver products and services at the
most economical levels, which allow full customer satisfaction.” 3.15 Taxonomy of costs of Quality
Costs of quality have two constituents which are as follow: 1. Costs of Conformance (a) Prevention
Costs: Prevention costs relate to the expenses of an activity taken to avoid or diminish the shortcoming
and failures. For example, cost incur on customer surveys, training to employees, product designing and
improvement, and preparation of quality reports etc. (b) Appraisal Costs: The expenses incur to inspect,
test and establish the conformance to determine the product quality is known as appraisal costs. For
example, costs involve in auditing and monitoring of product quality and equipment testing and
supervision etc. 2. Costs of Non conformance (a) Costs of Internal failure: Cost arises due to poor quality
of the product or services before handover them to consumers are known as the costs of internal failure
such as cost of modification of the product or service, idle time cost and cost of discarding the defective
products etc.