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. Examples of internal failure costs are:
- Failure analysis activities
- Product rework costs
- Product scrapped, net of scrap sales
- Throughput lost
Internal failure costs are one of the four costs of quality. The other three costs are prevention costs, appraisal costs, and external failure costs.