Prevention Cost

Prevention cost is the cost of incorporating good quality into a process or product. In other words, it’s designing products and processes in a manner that the possibility of faults being detected during internal product inspection is minimal to none. The objective is to make sure products are made exactly to prescribed design and hardware […]

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Appraisal Cost

A component of cost of quality, appraisal or inspection cost is the cost incurred by an organization on product quality inspection and testing. It’s the cost that a company pays to create quality consistently and which ensures defective products aren’t shipped out to the customer. Generally, quality testing teams are in place to ensure adherence […]

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Cost of Quality

Cost of quality is the cost a company bears for manufacturing products not meeting quality standards/specifications. In other words, it’s quantifying the wastages and defective units churned out by a firm. The wastage can be attributed to a machine, plant, production line, department, firm, etc. Product quality inspection costs, defective products’ manufacturing costs, etc. comprise […]

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Cost Center

A cost center is a department in an organization that doesn’t bring in any (direct) revenue for the firm, but does incur costs. The unit helps enhance the firm’s revenue-earning potential or supports revenue-generating departments. For example, the R&D (research and development) team doesn’t directly contribute to revenue, but lays the foundation for innovative and enhanced […]

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Co-Packing

Also called contract packing, co-packing is a business arrangement wherein a company has its products packaged by a third party firm, called co-packer (or contract packer or contract packager). In other words, the product is made fit to be shipped and placed on retail shelves. Co-packing services are usually sought by small manufacturers who cannot […]

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