Running Head: internal memo
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Internal memo
School:
Department:
Date:
Running Head: internal memo
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MEMO
Date:
To: The company
From: Employee
Subject: TYPES OF COST WHEN QUALITY IS CONSIDERED
In any production of a product, the cost must be incurred by any company that produces the
goods. In this case, cost is the value of money that has been used to generate a product, and
the money is not available for use again. In a production process, quality is essential to give a
product an upper hand in the market. Therefore in a production where cost has been taken
into consideration, three type of cost are involved, and they include; prevention cost,
appraisal cost and failure cost (Badr, 2003). All the mention costs are discussed below.
Prevention cost –these are the cost that is meant to prevent some defects of the products in
the organization. This value is specially designed to avoid the poor quality of the products;
this is because the primary goal of any company in a production activity is to ensure that all
the goods they are producing are of high quality to give them an avenue to be competitive in
the marketing environment. Some of the examples of the cost among the many include;
review of the new product in the company and quality planning. Every organization involving
itself in the production activity has the mandate to discuss new the products that they are
producing. This is because the marketing environment is experiencing some stiff competition
and for the product to survive and still exist, the organization management team has a
responsibility to review some factors of the product, for example, adaptability, saleability and
competitiveness of the product. Once they have established this, then they will be able to
recognize if the product is fit to be in the marketing environment. For the prevention cost to
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be useful in the organization, the management need to be proactive input in place an excellent
quality planning. Quality cannot be achieved without having a good plan on how to achieve
it. Thus, the organization involving itself in the production of tangible goods has to be quick
in developing a good quality plan strategies. This will give them room to produce quality
products that will be competitive in the market and will have a long lifespan.
Appraisal cost- these are the cost that play a significant role in ensuring that, in the
production of products there exist a proper audit, measuring and evaluation. With the
availability of the type of the cost, it ensures that the products are within the standards of
quality and they perform as the management requires them. Some of the costs under this
includes; the cost of product, process or service audit and calibration of measuring and testing
equipment. In the production process the organization should be in a position to monitor the
production of the product right from the start to the final stage to ensure that they are well
updated with the cost incurred and find out the return after the sale of the product. This will
make the firm avoid some deficit that can be lead to the failure of the organization. Also, all
the equipment that are being used by the body is required to be in a state where they can
produce a quality product. This is because the primary objective of the firm is a quality
production. To obtain that, the equipment is supposed to be well calibrated and standardize to
give the limits within which quality can be achieved.
Failure cost-this cost has been categorized into two, internal failure cost, and external failure
cost. The failure cost is the type of quality value in which it does not conform to the
customer’s requirements. For the internal failure cost, it’s the one who happen prior delivery
and includes the re-testing. Once the product has been produced, it’s good to confirm if it has
met the customer requirements and when there is a failure then the organization will carry out
retesting of the product to gather more conformational information (Groocock, 1974). But for
the external failure cost, this will happen once the company has delivered the product to the
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customer. Immediately the customer the product and find out that the product does not meet
the customers demand then the client will return the product back to the organization for
them to rectify the defect for it to suit the client’s needs.
Once the company has implemented the three types of cost, it is good for them to try and
have a balance between the production of the product and services delivery during
production. Cost and quality are always two incompatible factor of production this is because
there exist an inter-dependence relationship between the two. For the manufacturing company
to produce quality products, some cost must be incurred that’s, the three types of cost,
prevention, appraisal and failure cost.
So for the manufacturing company to have a smooth production process, the management
should have a good strategic plan which is working well by integrating the three types of cost
because they are the one which ensures that the company produces quality product to satisfy
the needs of their customers thus will have a long life span to survive in a competitive
marketing environment. A good functioning relationship of the three types of cost in the
manufacturing company has to be establish to allow production of quality product.
Running Head: internal memo
Works Cited
Badr, M. B. (2003). Staff Draft Report. Comparative Cost of California Central Station
Generation Technologies, pp 78-105.
Groocock, J. (1974). The Cost of Quality. London: Pitman Press.
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