The Relationship Between Cost and Quality, Essay Example

When considering the kinds of costs that are strongly considered when products are made, there are three primary costs that are considered most often. These three costs are the cost of appraisal, the cost of prevention, and the cost of failure. These costs are different from the costs of goods sold or (COGS) account. This is because COGS consist of the money that was used to manufacture and produce products such as raw materials or factory costs. However, these three costs being considers are not used for that same purpose. These three costs; appraisal, prevention, and failure costs; are the costs of detecting and trying to prevent any possible factory defects from those products.

It is necessary to consider these costs in the manufacturing and production of any tangible products because there is always the possibility of a factory defect or some kind of mistake during the manufacturing process of given products. There needs to be layers of safe guards to protect and detect against such possibilities as they should be expected in any line of production in tangible products.

Appraisal costs in accounting may also be referred to as the costs of inspection. These kinds of costs are used to help find any defects in the actual products preferable before they are shipped off to the consumer market. These costs are incurred from the activities that take place during the process of manufacturing these tangible products. This is to help assure that the quality regulations and standards of the products are met and are agreed upon in terms of their value on the market. A team of specialized inspectors are needed to help with the appraisal of products during the process of manufacturing the products and this is where the appraisal costs are allocated to, their wages and salaries.

Next in line are the costs of prevention. It is very important to consider that manufacturers would much rather prevent any possible defects in the production of their products in the first place as opposed to finding out about them later after the process of manufacturing. The cost of prevention invests in a safe guard to do just that. The purpose of these costs of prevention is incurred in order to help eliminate or minimize any possible defects in the process of production of tangible products. Some good examples of prevention costs are the incurred costs for needed improvements in the process of manufacturing, employee training for machinery, maintenance of machinery and engineering, and statistical analysis.

Finally comes the failure costs. There are two types of failure costs. Any cost of failure can either be internal or external. Firstly, an internal failure cost is usually incurred in order to eliminate or remove any defects before actually shipping that product to the consumer. Some examples of these internal failure costs are the costs of re-doing a product in the manufacturing process, products that are rejected, or parts that are reused for scrap.

There is then the external failure cost. If the consumer receives a product that contains any defects, then this is what triggers the external failure costs. Some examples of such external failure costs may include a product warranty, a decline in sales due to a tarnished reputation, or the payment for damages caused by the defect in that product.

Of the three costs explained, the prevention costs are usually the most expensive because manufacturers again would rather prevent any problems or defects in the first place.