The purpose of this memo is to identify and evaluate of the types of costs when quality considerations are made. The three types of costs are; appraisal costs, prevention costs and failure costs, which include internal and external failures.

Appraisal Costs: these costs are incurred in order for a company to inspect and test products, processes or services so that any defects or deficiencies can be uncovered or to make sure that none exist. These can include costs associated with paying inspectors, equipment, labs and audits.
Prevention Costs: these costs are associated with preventing defects or deficiencies from occurring. The costs can include planning, training, setting up systems, quality control procedures and attention to detail in design and production in order to reduce possible defections in service or work.
Failure Costs: costs that include both internal and external failures which consist of defective parts or faulty services. Internal failures are discovered internally by the company, usually during the production process. Internal failures can consist of bad materials from vendors, faulty machines or equipment, or just poor work by an employee. External failures are discovered after delivery of services or products. External failures can consist of defective products received by customer or poor service provided to the customer.

The trade-offs for these costs are well worth it to the company. For appraisal costs, it will be important to inspect the manufacturing equipment at regular intervals. By paying someone to inspect the machinery, it can prevent much larger costs in the event the machines break down and require additional costs for repair or even replacement costs. The trade-off for the initial costs of the inspection will help to ensure that machines work properly and smoothly in the future. For prevention costs it will be