# Quality costs > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Quality_costs > Markdown URL: https://mediated.wiki/source/Quality_costs.md > Source: https://en.wikipedia.org/wiki/Quality_costs > Source revision: 1279636486 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) In process improvement efforts, '''quality costs''' or '''cost of quality''' (sometimes abbreviated '''CoQ''' or '''COQ'''{{cite journal |last1=Sower |first1=Victor E. |last2=Quarles |first2=Ross |last3=Broussard |first3=Eric |title=Cost of quality usage and its relationship to quality system maturity |journal=International Journal of Quality & Reliability Management |date=13 February 2007 |volume=24 |issue=2 |pages=121–140 |doi=10.1108/02656710710722257}}) is a means to quantify the total cost of [quality](/source/Quality_(business))-related efforts and deficiencies. It was first described by [Armand V. Feigenbaum](/source/Armand_V._Feigenbaum) in a 1956 [Harvard Business Review](/source/Harvard_Business_Review) article.{{Citation | last = Feigenbaum | first = Armand V. | author-link = Armand V. Feigenbaum | publication-date = November–December 1956 | title = Total Quality Control | periodical = [Harvard Business Review](/source/Harvard_Business_Review) | volume = 34 | issue = 6}} Prior to its introduction, the general perception was that higher quality requires higher costs, either by buying better materials or machines or by hiring more labor.{{Citation | last = Feigenbaum | first = Armand V. | author-link = Armand V. Feigenbaum | year = 1991 | title = Total Quality Control | edition = 3 | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | page = 109 | isbn = 978-0-07-112612-0 | oclc = 71640975}} Furthermore, while [cost accounting](/source/cost_accounting) had evolved to categorize financial transactions into revenues, expenses, and changes in shareholder equity, it had not attempted to categorize costs relevant to quality, which is especially important given that most people involved in manufacturing never set hands on the product.{{Citation | last = Crosby | first = Philip B. | author-link = Philip B. Crosby | year = 1979 | title = Quality Is Free | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | page = [https://archive.org/details/qualityisfree00cros/page/121 121] | isbn = 978-0-07-014512-2 | oclc = 3843884 | url = https://archive.org/details/qualityisfree00cros/page/121 }} By classifying quality-related entries from a company's general [ledger](/source/ledger), management and quality practitioners can evaluate investments in quality based on cost improvement and profit enhancement.{{Citation | last = Arnold | first = Kenneth L. | publication-date = 1994 | title = The Manager's Guide to ISO 9000 | publisher = [Free Press](/source/Free_Press_(publisher)) | publication-place = [New York](/source/New_York_City) | page = [https://archive.org/details/managersguidetoi0000arno/page/244 244] | isbn = 978-0-02-901035-8 | oclc = 29845272 | quote = The main objective of quality cost reporting is to provide means for evaluating effectiveness and establishing the basis for internal improvement programmes. | url = https://archive.org/details/managersguidetoi0000arno/page/244 }} ==Definitions== Feigenbaum defined the following quality cost areas:{{Citation | last = Feigenbaum | first = Armand V. | author-link = Armand V. Feigenbaum | year = 1991 | title = Total Quality Control | edition = 3 | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | page = 111 | isbn = 978-0-07-112612-0 | oclc = 71640975}} {| class="wikitable" !colspan=2|Cost area||Description||Examples |- |rowspan=2|Costs of control (Costs of conformance) |Prevention costs||Arise from efforts to keep defects from occurring at all|| * Quality planning * [Statistical process control](/source/Statistical_process_control) * Investment in quality-related information systems * Quality training and workforce development * Product-design verification * Systems development and management |- |Appraisal costs||Arise from detecting defects via inspection, test, audit|| * Test and inspection of purchased materials * Acceptance testing * Inspection * Testing * Checking labor * Setup for test or inspection * Test and inspection equipment * Quality audits * Field testing |- |rowspan=2|Costs of failure of control (Costs of non-conformance) |Internal failure costs||Arise from defects caught internally and dealt with by discarding or repairing the defective items|| * [Scrap](/source/Scrap) * Rework * Material procurement costs |- |External failure costs||Arise from defects that actually reach customers|| * Complaints in warranty * Complaints out of warranty * Product service * Product liability * Product recall * Loss of reputation |} The central theme of [quality improvement](/source/quality_improvement) is that larger investments in prevention drive even larger savings in quality-related failures and appraisal efforts. Feigenbaum's categorization allows the organization to verify this for itself.{{Citation | last = Feigenbaum | first = Armand V. | author-link = Armand V. Feigenbaum | year = 1991 | title = Total Quality Control | edition = 3 | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | page = 113 | isbn = 978-0-07-112612-0 | oclc = 71640975}} When confronted with mounting numbers of defects, organizations typically react by throwing more and more people into inspection roles. But inspection is never completely effective, so appraisal costs stay high as long as the failure costs stay high. The only way out of the predicament is to establish the "right" amount of prevention. Once categorized, quality costs can serve as a means to measure, analyze, budget, and predict.{{Citation | last = Feigenbaum | first = Armand V. | author-link = Armand V. Feigenbaum | year = 1991 | title = Total Quality Control | edition = 3 | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | pages = 130–131 | isbn = 978-0-07-112612-0 | oclc = 71640975}} Variants of the concept of quality costs include [cost of poor quality](/source/cost_of_poor_quality) and categorization based on account type, described by [Joseph M. Juran](/source/Joseph_M._Juran).{{Citation | last = Juran | first = Joseph M. | author-link = Joseph M. Juran | year = 1962 | title = Quality Control Handbook | edition = 2 | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | pages = 1–38–1–39 | oclc = 64292499}} {| class="wikitable" !Cost area!!Examples |- |Tangible costs—factory accounts|| * Materials scrapped or junked * Labor and burden on product scrapped or junked * Labor, materials, and burden necessary to effect repairs on salvageable product * Extra operations added because of presence of defectives * Burden arising from excess production capacity necessitated by defectives * Excess inspection costs * Investigation of causes of defects |- |Tangible costs—sales accounts|| * Discount on seconds * Customer complaints * Charges to quality guarantee account |- |Intangible costs|| * Delays and stoppages caused by defectives * Customer good will * Loss in morale due to friction between departments |} [ISO 9004](/source/ISO_9000) also accounts for "external assurance" quality costs to account for customer– or government–required certifications (e.g., for [UL](/source/Underwriters_Laboratories), [RoHS](/source/Restriction_of_Hazardous_Substances_Directive), or even ISO 9000 itself).{{Citation | last = Arnold | first = Kenneth L. | publication-date = 1994 | title = The Manager's Guide to ISO 9000 | publisher = [Free Press](/source/Free_Press_(publisher)) | publication-place = [New York](/source/New_York_City) | pages = [https://archive.org/details/managersguidetoi0000arno/page/244 244–245] | isbn = 978-0-02-901035-8 | oclc = 29845272 | quote = External assurance quality costs are those costs relating to the demonstration and proof required as objective evidence by customers, including particular and additional quality assurance provisions, procedures, data, demonstration tests, and assessments (e.g., the cost of testing for specific safety characteristics by recognized independent testing bodies. | url = https://archive.org/details/managersguidetoi0000arno/page/244 }} ==Reporting== To ensure impartiality, reporting should be performed by the accounting department.{{Citation | last = Crosby | first = Philip B. | author-link = Philip B. Crosby | year = 1979 | title = Quality Is Free | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | page = [https://archive.org/details/qualityisfree00cros/page/123 123] | isbn = 978-0-07-014512-2 | oclc = 3843884 | url = https://archive.org/details/qualityisfree00cros/page/123 }} Additionally, to make it more understandable to a wider audience, the total cost of quality should be reported as a percent of sales, cost of sales, cost of manufacturing, or for firms in the service industry, cost of operations.{{Citation | last = Crosby | first = Philip B. | author-link = Philip B. Crosby | year = 1979 | title = Quality Is Free | publication-place = [New York, New York](/source/New_York%2C_New_York) | publisher = [McGraw-Hill](/source/McGraw-Hill) | page = [https://archive.org/details/qualityisfree00cros/page/122 122] | isbn = 978-0-07-014512-2 | oclc = 3843884 | url = https://archive.org/details/qualityisfree00cros/page/122 }} ==See also== *[Activity-based costing](/source/Activity-based_costing) *[Gold in the mine](/source/Gold_in_the_mine) *[Project triangle](/source/Project_triangle) *[Cost of poor quality](/source/Cost_of_poor_quality) ==References== {{Reflist}} {{Authority control}} {{DEFAULTSORT:Quality Costs}} Category:Costs Category:Quality control --- Adapted from the Wikipedia article [Quality costs](https://en.wikipedia.org/wiki/Quality_costs) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Quality_costs?action=history)). 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