A cost of quality system is based on the trade-off between incurring costs to meet product (or service)specifications and the costs of failing to meet those specifications.

Question

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A cost of quality system aims to balance the costs of ensuring that products or services meet specifications with the costs that may arise from failing to meet those specifications. This requires a trade-off between the costs of prevention (e.g. testing, training) and appraisal (e.g. inspection, monitoring) activities and the costs of internal and external failures (e.g. waste, rework, customer complaints). This tension between prevention and appraisal costs on the one hand, and failure costs on the other, must be managed in order to optimize the value that a company derives from its quality management efforts.

A Cost of Quality System Is Based on the Trade-Off