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Quality costs

Quality costs are commonly grouped into prevention, appraisal or detection, internal failure and external failure. The first groups seek to prevent or find defects; failure costs arise from things going wrong before or after delivery. The framework helps evaluate trade-offs and hidden consequences rather than minimise inspection spending alone. Some costs, such as lost reputation or future demand, are difficult to measure and may not appear directly in ledger accounts.

Worked example

A business spends $20,000 on prevention and $10,000 on inspection, with $15,000 rework and $25,000 warranty costs. Recorded quality cost is $70,000 before unmeasured reputation effects.

Common mistake

Appraisal in this context means checking quality, not assessing an employee’s annual performance.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA APM Direct September 2026–June 2027
ACCA MA Supporting September 2026–June 2027
FIA FMA Supporting September 2026–June 2027