PRESENTED BY:

GROUP 2
Sum of all costs associated with poor quality
or product failure.
Cost of quality is the amount of money a
business loses because its product or service
was not done right in the first place.
cost involved in fulfilling the gap between the
desired and actual product/service quality.
also includes cost of lost goodwill, and
expenses incurred in refund, replacement,
rework, scrapping, etc.
The “cost of quality” isn’t the price of creating
a quality product or service. It’s the cost of
NOT creating a quality product or service.
Every time work is redone, the cost of quality
increases
 For example: Cost incurred in
• Reworking of a manufactured item.
• Processing customer complaints.
• Customer returns.
• Material review and final inspection.
• Or even the replacement of food order in a
restaurant etc.
 Any cost that would not have been
expended if quality were perfect contributes
to the cost of quality.

 Cost of quality has two main components:

5. Cost of Conformance.
6. Cost of non-conformance.
• It is the total cost of ensuring that
a product is of good quality.

• It represents how much an

organization invests in ensuring
quality of its products.
Includes costs of *Quality Assurance*
activities such as standards, training, and
processes.
Costs of *Quality Control* activities such as
reviews, audits, inspections, and testing.

It further includes two types of costs.

• Inspection cost
• Prevention cost
The cost associated with measuring,
evaluating or auditing products or
services to determine the degree of
conformance to quality standards and
performance requirements.
Examples include:
• Incoming and source inspection/test of
purchased material
• In-process and final inspection/test
• Product, process or service audits
• Calibration of measuring and test equipment
• Associated supplies and materials
 Prevention Cost

The costs of all activities specifically designed

to prevent poor quality in products or
services.

These costs keep appraisal costs and failures

in the products and the services to minimum.
Examples include:
• New product review
• Quality planning
• Supplier capability surveys
• Process capability evaluations
• Quality improvement team meetings
• Quality improvement projects
• Quality education and training
Represents the total cost to the organization
of failure to achieve a good *Quality*
product.

Includes in-process costs generated by the

quality failures particularly the cost of rework.
It also includes post-delivery costs
including further Rework re-performance
of lost work (for products used internally),
possible loss of business, possible legal
redress, and other potential costs.
It also consists of 2 costs.
• External Cost
• Internal cost
It is the cost associated with defects found
after the customer receives the product or
service.

This occurs when products fail to conform to

requirements after being sold to customers.
 Examples can be:

• Processing customer complaints

• Customer returns
• Warranty claims
• Product recalls
Cost associated with defects found before the
customer receives the product or service

This occurs when products and services fail to

conform to requirements prior to external
sale; a cost of nonconformance.
Examples include:
• Scrap
• Rework
• Re-inspection
• Re-testing
• Material review
• Downgrading
www.businessdictionary.com

www.isixsigma.com

www.allbusiness.com

www.asq.org
THANK YOU.