Question

Wilson Company had the following quality costs for 2014:

Testing	$ 120,000
Rework	55,000
Training	90,000
Product liability insurance	70,000
Quality planning	86,000
Customer surveys	30,000
Re-inspection and retesting	35,000
Warranty repairs	100,000
Total quality costs	$ 586,000

Sales for 2014 were $2,000,000.

What is the amount of appraisal costs?

Answer 1

Cost of quality is a methodology that allows an organization to determine the extent to which its resources are used for activities that prevent poor quality. Quality-related activities that incur costs may be divided into prevention costs, appraisal costs, and internal and external failure costs.

Appraisal costs are associated with measuring and monitoring activities related to quality. These costs are associated with the suppliers’ and customers’ evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications. They could include:

• Verification—checking of incoming material, process setup, and products against agreed specifications
• Quality audits—confirmation that the quality system is functioning correctly
• Supplier rating—assessment and approval of suppliers of products and services

In the given example, following therefore should be included as part of Appraisal cost :

“ customer survey = 30,000”

Therefore, amount of appraisal cost will be $ 30,000

APPRISAL COST $30,000