The development of an economic quality cost model

An expression of the term 'economics of quality' has gone beyond the widely used term of 'quality cost'. Traditionally, every time work is redone or when an attempt is made to screen out defects, the cost of quality increases. However, the costs of handling such problems go beyond visible costs of activities like inspection and testing. Conventional cost accounting fails to provide manufacturers with reliable cost information due to the inability of counting so-called invisible and, in particular, intangible costs, and thus there is inaccuracy in calculating overheads. This paper presents an empirical model of the economics of quality as a function of two main components: traditional prevention-appraisal-failure expenses and hidden-opportunity quality loss costs. This process-cost approach looks at costs for a process that allows tracking costs normally associated with production in addition to those traditionally associated with quality. By this approach, it can help manufacturers to view a clearer picture of comprehensive quality costs.