Quality Cost Category In Companies

Quality Cost Category (Viacheslav Bundlyk-Unsplash Image)

YOGYAKARTA - Quality costs aka cost of quality are one of the expenditure components that must be prepared by the company with the right calculation. In addition to designing expenditure efficiency, this fee also helps the company to take management policies in maintaining and expanding its business.

What Is Quality Cost?

Quality costs are costs that are sticking out to tackle the quality of the products produced, either maintaining quality or exposing products that are flawed or not according to standards.

Generally, this budget arises because of products that are of poor quality or unable to meet consumer quality standards (called also cost of poor quality or COPQ). There is also COPQ because of a hidden budget, management budget, asset loss budget, loss due to project loss, and loss of consumer confidence.

Quality costs are grouped into 3 categories, namely prevention costs, assessment costs, and failure costs.

1. Prevention Cost)

As the name suggests, this cost is used to avoid mistakes that may occur in the quality of a product. Prevention costs can also be considered as an investment.

Although the figure may not be small, the resulting result is significant enough to minimize the formation of product mismatches. In other words, this cost can reduce the risk of greater spending on improvements that must be made because of quality defects (minimizing the company's work or making 2 times').

2. Assessment Fee (Appracial Cost)

This type of cost is also intended to reduce the possibility of poor product quality. For example, the expenditures calculated in this component are costs for inspection of raw materials, product testing in the process of making finished goods, and so on.

3. Failure Cost)

Failure in creating products with standard quality can be distinguished from 2 types, namely internal and external failures.

4. Internal Failure Cost (Internal Failure Cost)

The cost of internal failure takes place if there is a discrepancy between the resulting product and the expected quality and is detected before the product is sent to an outside party (consumer).

5. External Failure Cost (External Failure Cost)

The cost of external failure takes place at a time of discrepancy between the quality of the products produced and it is hoped that it will be discovered that after the product is in the hands of consumers. This is a very large and dangerous risk because it can reduce the image and credibility of the company so that it has the potential to reduce market share.

Why Are Quality Costs Important To Prepare?

Each business expects maximum profit. These advantages are obtained with consumer satisfaction which urges them to buy back and even be loyal to use these products.

Consumers will also only feel satisfied if the quality of the expected product is in accordance with the standard. If the company is unable to create product quality according to standards or changes, consumers will also be reluctant to carry out purchases (against repurchase). If the amount of demand is far less than the availability of goods, surely the company will not achieve the expected business objectives, right?

In other words, COPQ needs to be prepared to protect and protect product quality and reduce other cost components. Thus, the company can increase profits and have the advantage of being able to compete with its competitors.

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