Prevention costs are the costs associated with preventing poor quality, such as training, designing a quality product that is easy to manufacture and planning costs. Appraisal costs are the costs of determining the level of quality and finding defects. These costs include inspections, product testing and quality audits. Internal failure costs are the costs associated with finding and dealing with quality problems discovered before the product or service reaches the customer. Some examples of internal failure costs are rework, scrap and machine downtime due to quality problems. External failure costs are the costs of poor quality discovered by the customer. Some examples of external failure costs are product returns, lawsuits and repairs.
If we designed a higher quality product that was easier to manufacture, then both internal and external failure costs would decrease since we would produce less defective product. Appraisal costs would probably decrease since we may be able to reduce inspections and quality audits. Prevention costs would increase since we expended effort to design a better quality product.