COST OF QUALITY

Cost of quality is a method for calculating the costs companies incur ensuring that products meet quality standards, as well as the costs of producing goods that fail to meet quality standards.

The goal of calculating the cost of quality is to create an understanding of how quality impacts the bottom line. Whether it’s the cost of scrap and rework associated with poor quality, or the expense of audits and maintenance associated with good quality, both count.?Cost of quality gives manufacturers an opportunity to analyze, and thus improve their quality operations.

This two-pronged approach to quality can be categorized as “control” (good quality) vs. “failure of control” (bad quality).

Cost of quality has four main components between the two buckets of “good” and “bad” quality.

Taken together, the four main costs of quality add up to make up the total cost of quality.

CoQ = Appraisal + Prevention + Internal Failure + External Failure