Internal failure costs definition
/What are Internal Failure Costs?
Internal failure costs are those costs of quality associated with product failures that are discovered before a product leaves the factory. These failures are discovered through the firm's internal inspection processes.
Example of Internal Failure Costs
There are numerous examples of internal failure costs. They can include failure analysis activities, product rework costs, product scrapped (net of scrap sales), and throughput lost. An especially large internal failure cost is throughput lost, where the margin earned on a company’s bottleneck operation is irrecoverably lost when a product produced through it is declared faulty.
What are the Four Costs of Quality?
Internal failure costs are one of the four costs of quality. The other three costs are preventive costs, appraisal costs, and external failure costs.