Cost of Quality

Cost of Quality is a tool and technique of the fourth edition PMBOK®’s Plan Quality process. These are the expenses associated with the investment to make a quality product and the costs of failing to meet quality standards. Cost of Quality is broken down into these two major categories which are called the Cost of Conformance and the Cost of Nonconformance. The Cost of Conformance may be further broken down into Prevention Costs and Appraisal Costs. Prevention Costs represent the investment of keeping the defects from happening at all. This could include extra training for staff members and sophisticated equipment that accurately assembles a product. Appraisal Costs are the expenses of checking the product in order to find any defects that may have occurred. This could include visually inspecting the product, turning the product on to see if it works, and using equipment that detects products that are not within the set parameters. The Cost of Nonconformance may also be broken down into two categories—Internal Failure Costs and External Failure Costs. If a defective product is discovered in-house before being sent to the customer, the costs of scrapping or re-doing the product are Internal Failure Costs. If the product is sold to the customer, the costs of handling returns, complaints, lawsuits, and lost business are called External Failure Costs.