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Prevention Costs are all of the costs involved with keeping a defect from happening. This starts at the concept stage and is involved all the way through until the customer has finished using the product or service and appropriate disposal has occurred. In later module we will look at several tools and techniques that can be used in the prevention area.
Appraisal Costs are all of the checks and confirmations both manual and automatic that are in place to find out if a defect has occurred before releasing the product to the customer. The traditional Quality Assurance Department usually has a large number of activities associated with appraisal costs. Others are built into the process as checks and are made between process steps.
Internal Failure Costs are all of those associated with an actual failure that is found internally. Scrap, waste, recycle, rework, off specification inventory, etc. are a few of the internal failure costs.
External Failure Costs are those that occur when a product or service fails in the hands of a customer. Returns, allowances, additional shipping, customer complaint departments, lawsuits, ill will, lost customers, etc. are a few of these costs. Sometimes defect in a small product line can bankrupt the organization.

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