CPIM Practice Exam

What type of cost is associated with proactive measures to improve quality?

1. External failure costs

2. Internal failure costs

3. Prevention costs

4. Appraisal costs

The correct answer is: Prevention costs

Prevention costs are directly linked to efforts and activities undertaken to prevent defects and improve overall quality before they occur. These costs include expenses related to quality planning, training, process control, and other proactive initiatives aimed at ensuring that products meet quality standards. By investing in prevention, organizations can reduce the likelihood of quality issues arising, leading to lower costs in the long run, as they minimize both internal and external failure costs. In contrast, external failure costs arise when defects are identified after the product has reached the customer, resulting in warranty claims, returns, and damage to customer satisfaction. Internal failure costs occur when a product fails to meet quality standards during the manufacturing process, leading to rework, scrap, and other corrective actions. Appraisal costs are associated with measuring and monitoring activities to ensure quality, such as inspections and testing. While these other types of costs play a role in the overall quality management framework, prevention costs stand out as the proactive approach to enhancing quality before issues can arise.