When a company is making quality considerations, they have many important factors to adhere to, especially the cost. Three costs have to be considered when making these considerations. In the process of improving the quality of the company's products, Klads Corporation should take into consideration appraisal cost, prevention cost, and external failure cost (Jan, 2017) .
Appraisal costs are incurred to ensure that the products manufactured are not defective, and they conform to the required industry standards and quality (Jan, 2017) . They cater to quality checks and tests that detect product defects and ensure that the product is functional and able to satisfy the consumer's wants and needs. For instance, Klads corporation that deals in the manufacturing of fashion garments would need to hire a third party to perform quality-control tests and audits on the products. This would include lab tests to perform tests on the fabric and ensure it is skin-friendly to the customer and to provide that the quality is satisfactory to the customer. This process could cost upto 50000 US Dollars to implement. A research team would also need to be developed for data collection and research of the most favorable raw materials that could be used for clothing construction.
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Prevention cost is an important expense in ensuring product quality. This refers to the expenses incurred to minimize appraisal costs through processes that prevent and proof product defects rather than repair them. A suggestion is that the company could hire a full-time quality assurance officer as part of the team, whose work would be to double-check every manufacturing process to ensure conformance of quality and standards. Prevention costs are also used by the company to improve the manufacturing process by upgrading their systems and machines. Funds used in training workers and hiring qualified personnel are also part of preventive costs. An advantage is that if these processes are done keenly, there would be less or no need to incur appraisal costs.
Failure cost refers to the expenses incurred to fix product defects that occur between manufacture and delivery ("Quality costs - prevention, appraisal, internal and external failure costs | Accounting for Management", 2020) . Most products get ruined during the transition as they get delivered to the customer, even after going through the company's necessary quality checks. This might not satisfy the customer's needs. The company will need to incur some expenses to refund the customer or conduct repairs to keep its reputation and ratings. For instance, in Klads Corporation, garments usually experience defects in wear and tear during the delivery process, which is often due to poor packaging. This factor has caused the company to use a significant amount of money to replace returned goods and fuel to re-deliver goods to customers.
The tradeoffs associated with these three costs are often caused by the entire team, from the managerial position to the service positions. The lack of an effective quality control team in the company causes an increase in appraisal costs. Hiring a competent quality assurance team and consulting a third party in the company's audit will ensure that the company uses minimal appraisal expenses.
Preventive costs could be balances through keeping records of appraisal processes. This will also ensure that regular check-ups are done in all the processes leading to production. The company could also ensure that employees are accountable for negligence during production; this will increase they are careful enough to avoid product defects. Failure costs are increased through poor production and mostly careless packaging. This could be balanced through a constant inspection before delivering products and upgrading the company's packaging system.
References
Jan, O. (2017). Quality Costs. Retrieved 17 November 2020, from https://xplaind.com/245156/quality-costs
Quality costs - prevention, appraisal, internal and external failure costs | Accounting for Management. (2020). Retrieved 17 November 2020, from https://www.accountingformanagement.org/costs-of-quality-or-quality-costs/
