1. Group Presentation
on Topic
COST OF QUALITY & PROFITABILITY
Group Members
(Name & IDs)
ABC 1234
ABC 1234
ABC 1234
Course: Total Quality Management
Course leader: Miss Nadia Qureshi

2. Before going to
start our
It is need to presentation and
define What is its explanation, it is
cost ? necessary to
understand What
quality is?
Cost of Quality
Cost of Quality Abbreviated as
COQ or some time simply
called as Quality Cost

3. The cost can be define
under different concept but
here we will define it with
business point of view.

4. Definition of cost
From the business point of
view Cost may be define as the
amount of money that
expended to acquire a thing.
cost has different type that
some are direct and some are
indirect such as opportunity
cost is consider as in direct
cost

5. Quality can be define with
different perspective but here
we will define quality with only
with the consumer and the
producer perspective.

6. Consumer based definition of Quality
Consumer based definition
of quality is based on the
idea that quality is an
individual matter ,and
product that best satisfy their
preference are consider the
highest quality.

7. Producer based definition of Quality
This definition focus on
manufacturer common practice
that is conformance to
requirement.
Conformance to requirement
means to fulfill need. A
manufacturer mainly
requirement are to decrease the
cost associated with product
producing. But with out its
affecting quality.

8. In previous slide we
hade make a basic
idea a bout Cost and
Quality and now in up
In up coming slides….. coming slide….
 Definition of quality cost
 Different Views of Quality cost
 Different Categories of Quality cost

9. Definition of Quality Cost
 Quality cost are defined as all those
costs that don't add some thing with a
product quality, but it occurs due to
fulfilling the requirements establish by an
organization for its customers and
society.
OR in simple words……….
 Quality cost are generally any cost
associated with the discovery of poor
quality and its fixing.

10. Quality Cost Different Views
Cost are basically View under three
perspectives.
 No.1 Higher quality means higher cost.
 No.2 Cost of Improving quality is less
then saving cost.
 No.3 The cost of not satisfying customer
for its first time.

11. Continu…
No.1 Higher quality means higher cost
High quality product are consider those that
are high in feature, while to put high or extra
feature to a product more resource will need
and which on result will increase the cost to
a product.

12. Continu…
No.2 Cost of improving quality is
less then saving cost
Product in low quality create extra
cost in form of scrap, machine break
down etc
A firm should improve its process
and function to reduce its cost. The
cost on improving process and
function should consider less then
saving them.

13. Continu…
No.3 The cost of not
satisfying customer for its
first time.
This cost include the cost that
result from lost of customer or
market share as they not
satisfies with first time while
customer experiencing (using)
the product.

14. Categories (Type) Quality Cost
Understanding
these Quality
Quality cost can be cost type is
categories into 3 necessary in
order to
basic categories understand its
that are: impact on a firm
profitability
No.1 Prevention And we also
Cost: know that
profitability is
No.2 Appraisal cost the main
objective of
No.3 Failure cost every firm.

15. Continu…
No.1 Prevention
Cost
Prevention cost
include those
activities which
remove and prevent
defect from
occurring in the
production process.

16. Contin…
No.2 Appraisal
Cost Appraisal cost
are those cost that
incurred to identify
poor quality
products after they
incurred .i.e. such
as cost in

17. Contin…
No.3 Failure cost
Failure cost are consider those that
incurred either during the production
process (internal)
or after the product is shipped (external)
 internal failer include such as the
machine break down
 External failer such as return,
warienty etc

18. The
relationship of
type of cost of
quality (COQ)
and
profitability of
a firm.
Quality cost (types) and its relationship
with profitability

19. Quality Cost as a Driver of Profitability
There is many concept of TQM the two
are include ;
1) Satisfying the customer need by
providing quality product
2) But the product must be high in
quality and low in cost
The main aim/objective of both these
concept of TQM are to increase the
profitability (return on investment)

20. Contin…
A firm can increase its profitability not by
Satisfying customer but can increase its
profitability by reducing some direct and in
direct cost. (That are to be describe in later
slides)

21. Prevention Cost and firm
Profitability
A firm that practices the continuous
improvement in their process and function
such a firm will have less cost of Scrap and
wastage of sources.
Less wastage of resource directly effect the
firm profitability.

22. Appraisal cost and firm
profitability
By inspection (which is also consider as cost)
a firm can also to over come to some of its
cost and on return it can create an
accumulated profit to that firm.

23. Filer cost and the firm
profitability
Some cost such as External cost can impair
the goodwill of the company and thus
indirectly effect a firm profitability.
Due to this indirect nature of this cost it is also
called Hidden cost.

24. Pictures can also be presented more dramatically in widescreen.
Question & Answering Session
Thanks to all