Cost of Quality Calculator
The total cost of quality — prevention, appraisal, internal failure and external failure — and where spending more saves money.
Quality cost splits four ways.
How the cost of quality calculator works
Quality cost splits four ways. Prevention and appraisal are what you spend to avoid defects; internal and external failure are what defects cost you. External failure — a defect reaching the customer — is the expensive one, typically ten times the internal cost.
The classic finding is that the four are not independent: spending more on prevention reduces failure costs by more than it costs. Most operations are under-invested in prevention because it is visible spending against invisible savings.
Formula: total = prevention + appraisal + internal failure + external failure
Worked examples
| Inputs | Total cost of quality | Note |
|---|---|---|
| A typical operation | 44,200 | about 1.5% of revenue |
| Higher escape rate | 105,000 | external failure dominates |
| More prevention | 39,400 | higher conformance, far lower total |
FAQFrequently asked questions
What is the cost of quality?
Everything spent preventing, finding and fixing defects — split into conformance (prevention, appraisal) and non-conformance (internal and external failure).
What is a good level?
World-class operations run under 2% of revenue. Between 5 and 10% is common and usually means prevention is under-funded.
Why is external failure so expensive?
Because it adds returns, warranty, support, expedited replacement and reputational damage on top of the unit. Ten to a hundred times the internal cost is typical.
Is more inspection the answer?
Rarely. Appraisal finds defects; it does not stop them being made. Prevention has the better return, which is exactly why it is under-invested.
What is the 1-10-100 rule?
A defect costs 1 to prevent, 10 to catch internally and 100 once it reaches the customer. The exact numbers vary; the orders of magnitude hold.
Where these figures come from
- Corporate Finance Institute — EBITDA — why EBITDA is a non-GAAP measure with no single definition
- US SEC — Non-GAAP Financial Measures, Compliance & Disclosure Interpretations — the disclosure rules that exist precisely because EBITDA is not standardised
- Financial Reporting Council — the UK accounting and audit regulator
Last checked: September 2026. These are standard management-accounting definitions; where a term has no single agreed definition, the page says so.