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Wgu Task 1 Cost-Quality Relationship

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Memo To: Vivian Cutthroat

From: Becky Mead - 334123

Date: March 22, 2019

Subject: Cost-Quality Relationship

The objective for Quality products or services and what is needed for fabrication to ensure our product and service is above competitors standards.

  1. Appraisal Cost – Costs of activities designed to ensure quality or uncover defects.
  2. Prevention Cost- Costs in order to keep a quality problem from occurring
  3. Failure Cost – Costs caused by defective parts or products or by faulty services.

Quality cost can arise anywhere in a company and comprise a major portion of the total expense of the business or project being evaluated.

Examples of these types of costs could be.

  1. Appraisal Costs could be related to inspections of equipment, testing and any other activities intended to uncover defective products or services, or to assure that there are none.  The interruption of production to take samples would be considered part of the appraisal cost.
  2. Quality improvement programs, training, monitoring, data collections, analysis and design cost.  Anything related to prevent defects from occurring would be considered a preventions cost.
  3. Failure Cost can be broken down into two subcategories – Internal Failure Costs and External Failure Costs.
  1. Internal Failure Cost – cost related to a defective product or services before being delivered to the consumer.  Reworking, problem solving, and scrap will be part of the Internal Failure Cost.
  2. External Failure Cost - Costs related to delivering substandard products or services to the consumer.  Returned goods, warranty cost, claims and penalties would be considered part of the external failure cost.

Financial cost will always be a common denominator when evaluating trade-offs among prevention and failure cost.  

  1. If we increase the number to test and inspections, the appraisal costs will be higher, but most likely the defective until will be identified and correct the issue causing the defect, the potential trade-off would be an improved product.
  2. The cost of preventing defects would be implement technology systems to help monitor the processes of production or train employees to inspect the product coming from vendors to assure the best quality parts.  Training employees how to properly use the machines and how to handle the materials will allow them to pay attention to detail during the process and internal failure cost will be reduced.
  3. Another trade-off would be regards to the external failure cost.  Review all delivery vendors, make sure they are up to TNA fabrications standards, speak with the consumers, send out surveys in regards to our product and what we need to do keep their business and eliminate the possibility of losing them as clients.  We might need to request bids for new deliver vendors or create our own delivery department to help reduce the claims, reworking cost and returned goods, which will in turn keep the company name at the standard we are striving for.



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