Memorandum

Memorandum

To: John Smith, Supervisor

From: ********

Date: 12/11/2014

Re: Three types of cost to consider when quality considerations are made.

CONFIDENTIAL

There are three types of costs when quality considerations are made. These costs are failure costs, prevention costs and appraisal costs. Failure costs are costs that result from products and services that do not conform to the requirements and standards set by management with consideration of customer specifications and needs. Within the failure costs you have two sub-categories which are internal failure costs and external failure costs. Internal failure costs are costs that are incurred prior to delivery or shipment of the product to the customer. External failure costs are costs incurred after the shipment or delivery of the product to the customer. An example of internal costs would be anything that would have to be redone, retested, reviewed or downgraded. An example of external costs would be processing customer complaints, customer returns, warranty claims and product recalls. Prevention costs are incurred costs that relate to activities conducted with a purpose of preventing the production of poor quality products and services. This is considered a preventative measure because you are trying to solve the problem before the problem causes quality issues. For example, a review of a new product, quality planning, quality training and education are prevention costs. Appraisal costs, these are costs that are associated with measuring and evaluating products or services to assure conformance to quality standards and performance requirements. The idea is to have a determined set of standards and criteria of quality products and services. This would include costs related to inspections and tests of purchased materials, inspections that are in the process and also final inspections; audits of process, products and service, calibration of measuring and test equipment.

In order to properly...