Appraisal costs are the costs incurred to prevent defects in products and services. True False
The correct answer and explanation is:
Correct Answer: False
Explanation:
Appraisal costs are not the costs incurred to prevent defects in products and services. Instead, they are the costs associated with measuring, evaluating, or auditing products or services to ensure they meet quality standards after production. These costs are part of the broader category of quality-related costs in a business and are specifically aimed at detecting defects, not preventing them.
Examples of appraisal costs include inspection of incoming materials, in-process and final product inspections, testing and lab work, and equipment calibration used for quality control. These activities occur after the product or service is created and are designed to catch defects before the product reaches the customer.
In contrast, the costs incurred to prevent defects are called prevention costs. These include activities like employee training, quality improvement initiatives, process control systems, and supplier quality evaluations. Prevention costs aim to eliminate the root causes of defects before they happen.
Quality costs are generally divided into four main categories:
- Prevention costs – to prevent defects from occurring.
- Appraisal costs – to detect defects through inspection and testing.
- Internal failure costs – defects found before the product reaches the customer.
- External failure costs – defects found after the product is delivered to the customer.
Misunderstanding the difference between these categories can lead to mismanagement of quality efforts. Investing more in prevention costs can often reduce the need for appraisal and failure costs. This proactive approach is generally more cost-effective in the long run and leads to higher customer satisfaction.
Therefore, the statement is false because appraisal costs do not prevent defects but rather help in identifying them after the fact.