What Are Prevention & Appraisal Costs?

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A factory production line
A factory production line (Image: GordanD/iStock/Getty Images)

In an effort to manufacture products free of defects companies establish quality control programs. These programs are designed to monitor the quality of the product or service to determine what procedures or processes need to be changed to ensure a perfect outcome every time. The costs related to a quality control program fall into four categories. Two of the categories are prevention costs and appraisal costs.

Prevention Costs

Prevention costs include those associated with preventing defective or poor quality products from being manufactured. This covers a wide range of activities, including product reviews, process evaluations and quality improvement planning. The total prevention costs may include wages and benefits to hire a quality control specialist, the purchase of new equipment and staff training.

Appraisal Costs

Appraisal costs, also referred to as inspection costs, relate to the examination of the product before it is shipped to the customer. Appraisal costs include the wages of the inspectors, costs related to purchasing and maintaining testing equipment and supplies.

Quality Control

Prevention and appraisal costs are two of the four factors that make up the total costs associated with product quality control. To understand the total costs associated with manufacturing a product, a company must include the internal and external failure costs as well. Activities that fall into these categories include processing of customer complaints, reworking of defective products and handling of product returns.

Considerations

Companies that focus on only one quality control cost without considering the others may find it difficult to make improvements. For example, focusing on appraisal costs alone through a product inspection program initially sounds like a smart business idea. While the process will identify defects in the product prior to shipment, it does not offer solutions or changes to the process to prevent the defect from occurring again.

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