Cost Of Quality

Given the following costs: Requirement Analysis – Rs1000, Code Review – Rs500, Review of User Documents – Rs600, Continuing Education Programs – Rs800, Design – Rs400, Then what is the Cost of Quality?

Questions by G.D.S.Prasad   answers by G.D.S.Prasad

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  • Mar 22nd, 2009

What is the cost the business would have to incur if a big error was missed if these steps were not followed properly? Damages in terms of money (cost of litigation, regulatore claims, cost of fixing those bugs) and to the brand name of the company (open to discussion). 
For me, that is the cost of Quality

Let's not confuse "Cost of Quality" with "Cost of Poor Quality".

The Cost of Quality is the combined cost of all company expenditures devoted toward producing quality products and services that are beyond actual production costs.  Given the current scenario, if the costs mentioned were the only expenditures, I would consider whether each of these expenditures were necessary for the actual design of the product. Those that were intended to improve the quality of the product are the Costs of Quality.  In fact, all of a company's efforts to prevent and detect defects are "Costs of Quality".

As I review the list of costs, the Code Review, Review of User Documents, and Continuing Education are intended to improve quality beyond what is necessary for production.  Therefore, in this scenario, the cost of quality is Rs500 + Rs600 + Rs800.  

Abisurd's answer addresses the Cost of Poor Quality.  Generally speaking, the Cost of Poor Quality are the combined actual and implied loss of revenue that a company

endures when products and services do not conform to customer requirements or satisfy their perceived needs. These costs include product/service abandonment, customer dissatisfaction, loss of reputation, sales returns and allowances, complaint handling, and the list goes on. 

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  • Feb 6th, 2010

In nutsheel, we can say that any expenditure towards establishing/maintaining the Quality (SQA audits of process/product, peer review for preventing defects, repairing the code, Testing, cost imposed by the customer for the defects, resources  etc.) apart from the actual cost incurred during product development is Cost Of Quality.

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  • Apr 26th, 2010

The costs  that are intended to improve the quality of the product are the Costs of Quality. In fact all of a company's efforts to prevent and detect defects are "Costs of Quality". COQ includes the following

Prevention cost - Like Trainings, Defect Prevention Activities. This will prevent issues to occur
Appraisal Cost - Testing, Review
Failure Cost - Internal and External Failure - Cost incurred  to fix and verify the bugs

COQ should not exceed 30 % of over all Project cost.

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