What is the third element of the Cost of Quality that complements Prevention and Appraisal?

The third element of the Cost of Quality that complements Prevention and Appraisal is External Failure costs. This framework consists of three major categories: Prevention costs, which are incurred to prevent defects; Appraisal costs, which are associated with measuring and monitoring activities to ensure quality; and External Failure costs, which occur when defects are found after the product has been delivered to the customer.

External Failure costs encompass all costs that arise from defects discovered after a product reaches the customer, such as warranty claims, returns, repairs, and loss of reputation. These costs can be significantly high because they not only involve direct financial losses but also affect customer satisfaction and loyalty, leading to potential future revenue loss. By focusing on managing all three categories—Prevention, Appraisal, and External Failure—organizations can minimize overall quality costs and improve their products and services, which ultimately benefits both the company and its customers.

The other choices, such as costs of materials, internal auditing costs, and cost of inspection, do not align with the established components of the Cost of Quality framework. While they may be related to overall expenses in production or quality management, they do not specifically represent the recognized elements of quality costs in the same manner as Prevention, Appraisal, and External Failure costs do