Appraisal costs are associated with the valuation and inspection processes to ensure the quality of products or the fair market value of assets. They play a crucial role in both financial accounting and quality management.
The total costs incurred to ensure good quality or rectify poor quality. By enhancing quality, managers can reduce costs and boost profits. These costs are categorized into prevention, appraisal, internal failure, and external failure costs.
External Failure Costs are all costs associated with defects found after a product or service is delivered to the customer. These costs are crucial for understanding a company's approach to quality management and customer satisfaction.
Internal Failure Costs are expenses associated with defects that are detected before a product or service is delivered to the customer. They are part of the broader category known as the Cost of Quality.
Expenditures incurred by an organization to prevent defects in its products or services, which form an integral part of the Cost of Quality and are sometimes related to Environmental Costs.
