Conformance costs are incurred to ensure that products or services meet quality standards and are free from defects. They are proactive costs, often referred to as the 'costs of good quality'. This category is comprised of two distinct types of costs:

1. Prevention Costs: Costs incurred to prevent poor quality from occurring in the first place (e.g., quality planning, supplier evaluation, employee training).

2. Appraisal Costs: Costs incurred to measure and monitor activities to ensure quality standards are being met (e.g., inspection, testing, quality audits).

Both are investments made to avoid failures.

A. Internal Failure Costs: These are costs of non-conformance, resulting from defects found before the product is delivered to the customer (e.g., scrap, rework).

B. External Failure Costs: These are costs of non-conformance, resulting from defects found after the product has been delivered to the customer (e.g., warranty claims, returns).

1. The Chartered Institute of Management Accountants. (2017). CIMA Official Terminology 2017. Page 33. The official terminology defines the Cost of Quality

stating

"Costs of conformance are prevention costs and appraisal costs. Costs of non-conformance are internal failure costs and external failure costs."

2. Drury

C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning. In Chapter 19

"Quality costing and environmental costing

" the text explicitly categorizes prevention and appraisal costs as the costs of conformance (or control costs)

which are incurred to ensure high quality is achieved.

3. Juran

J. M.

& Gryna

F. M. (1988). Juran's Quality Control Handbook (4th ed.). McGraw-Hill. Section 4

"Quality Costs

" details the model where Prevention and Appraisal costs are grouped as the costs of "conformance" or control

while failure costs represent the costs of "non-conformance."