What are the three levels of product costs?

The three levels of product costs are categorized into Prevention, Appraisal, and Failure. This framework aligns with quality management principles and is particularly relevant in cost of quality analysis.

Prevention costs are incurred to prevent defects from occurring in the first place. This includes expenditures on training, process control, and quality improvement initiatives. The aim here is to ensure that products are designed and produced right the first time, reducing the likelihood of defects.

Appraisal costs relate to the activities involved in measuring and monitoring activities related to quality. This includes costs associated with inspection, testing, and evaluations that are conducted to ensure that products meet quality standards before they are delivered to the market.

Failure costs arise when a product fails to meet quality standards, resulting in either internal or external failure. Internal failure costs occur when defects are found before the product is shipped, while external failure costs occur when defects are discovered after delivery, leading to returns, repairs, or warranty claims.

Understanding these levels helps organizations assess their quality management efforts more thoroughly and identify areas where they can reduce costs associated with poor quality, ultimately supporting a more efficient and effective production process.