CMA Study Group

Cost classifications

  • 1.  Cost classifications

    Posted 06-17-2021 01:39 PM
    Hi all,

    I usually have problem classifying costs into correct classifications (prevention, appraisal, internal failure, external failure). I summarized here some costs with labeled classifications based on my understanding. I hope you can let me know if I'm wrong with any cost, and appreciate if you can add some more examples that can be easily confused.

    Rework costs                  Internal failure
    Warranty repair costs           External failure (you provide warranty service when issues found by customers)
    Product line inspection        Appraisal (it help DETECT product issues)
    Design engineering             Prevention
    Supplier evaluation              Prevention
    Labor training                      Prevention
    Product testing                    Appraisal
    Breakdown maintenance    Prevention (it avoid the issues from happening)
    Product scrap                     Internal Failure
    Cost of returned goods       External Failure
    Customer support               External Failure (because customers reach customer support once the issues happened. I'm not sure about this one)
    Product liability claims        External Failure (similar to warranty repair)

    Thank you very much,

    Kien Nguyen
    Ottawa ON

  • 2.  RE: Cost classifications

    Posted 06-24-2021 04:51 PM
    Hi Kien,

    here is another one I found from CMA handbook.

    Inspecting incoming raw material              appraisal cost


    Chirag Patel