Manufacturing Costs

The total costs related to quality in a company are determined by the sum of the costs of obtaining the desired quality outcome (prevention and evaluation) plus the costs of the failures or defects (internal and external).

Normally, when the cost of obtaining quality increases, the cost of the failures is reduced, therefore, the companies must look for the area in which their optimal total cost of quality is located. This area would be located at the point where the total costs of quality are minimal and the level of quality optimal.

Manufacturing costs are typically divided into three categories:

1. Direct materials, which is the cost of materials that can be traced back to the product, such as aluminum in beverage cans.
2. Direct labor, which is the wages and fringe benefits earned by the people who are physically involved in converting the raw materials into a finished product.
3. General manufacturing expenses, which include all other expenses incurred in manufacturing activities. These indirect costs include repairs and maintenance, depreciation of manufacturing equipment, utilities, salaries of manufacturing supervisors, etc.