Cost of Quality

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Appendix An investment in quality training has more benefits to a company than just in the

improvement of product quality. The manufacturing company MNO is considering increasing training costs with an expectation of lowering quality costs by 20%.

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Cost of Quality

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Prevention costs are associated with preventing poor-quality products, before they are

manufactured. Examples of a production cost include the design work for product development, the incoming raw material inspection, and the training of employees since they are all incurred prior to a product’s production. Appraisal costs are associated with the detection of poor-quality products during and after the production of the product. Examples of this include the inspection at the end of the production process, Internal failure costs are costs with finding poor-quality products prior to shipping. An example of this cost includes the scrap for the production process. External failure costs are associated after a customer purchases the product. The total cost related to customer complaints in an external failure cost. (Zouncourides, 2014) MNO can benefit from increasing it’s training budget from $12,000 to $27,000 because it reduces all of the costs associated with quality are reduced by 20%, saving the company $7,400 a year. As stated by the lecture, “prevention is almost always better than inspection.” (Zouncourides, 2014) As stated in the PMI book, “the cost of preventing mistakes is generally much less than the cost of correcting mistakes when they are found by inspection or during usage.” (Project Management Institute, 2013) The benefits of increasing the costs associated with training can benefit the company on more levels than just product quality. Better training programs improve employee morale “if they

Car Budget 3 feel it can help them to overcome weaknesses and shortcomings that are preventing them from...