| ABC COMPANY |
Memo
To: | Jane Doe, President of ABC Company | From: | Anne Sobala, Quality Control Manager | cc: | John Doe, Vice President of ABC Company | Date: | July 12, 2014 | Re: | Quality Control Costs | | |

I would like to bring to your attention three types of costs regarding quality in our company. These costs are appraisal costs, prevention costs and costs associated with failure of control (Register, 2003).
Appraisal costs would be material inspection costs, test and inspection of equipment, and quality audit costs. These would be a total cost of $163,000 per year to the company and would include including the cost of purchasing testing equipment to test and inspect our equipment at $86,000 per year. The quality audit would cost us $45,000 per year to hire an external auditor to carry out the audit and appraisal of our operations. The final cost is for material inspection at $32,000 per year.

Costs associated with prevention of poor quality would include quality training and staff development costs, cost of production quality verification and investment in quality related system and equipment maintenance costs and would cost us $ 141,000 per year. The cost of undertaking training on all staff would be $22,000 per year. Equipment costs are per purchase and would be $145,000. There should not be a need to replace the equipment before its useful life ends. We would however need to maintain the equipment in good working condition and have the equipment serviced on a regular basis for a cost of $73,000 per year. An additional $12,000 per year would be incurred in verifying the quality of our products.

The costs associated with failure of control are costs that are incurred when control measures are not taken and poor quality is produced. These costs include material production costs, product liability and loss of reputation. These costs could