Q19-21RQ - Horngren'S Financial And Managerial Accounting

Question

List and define the four types of quality costs.

Step-by-Step Solution

Answer

The four types of quality costs are as follows –

a) Prevention cost

b) Appraisal cost

c) Internal failure cost

d) External failure cost

Prevention cost

These are the cost incurred on activities or techniques that are applied to avoid the poor quality of goods or services.  

 

Appraisal cost

Appraisal costs are the cost incurred to detect the poor quality of materials, goods, and services.

Internal failure cost

These are the cost incurred after production but before delivery. The cost is incurred on correcting the poor quality.

External failure cost

This cost is incurred for the correction of poor quality after delivering the product or services to the customer.