External failure occurs a defect is not detected until the product is already with the consumer. Inspection of incoming raw materials takes place before production.
Prevention costs are the costs that are incurred in order to prevent a defect from occurring. Evaluating suppliers on an ongoing basis to make sure their work is of the proper quality is a prevention cost. But checking each unit of incoming raw materials as it is received is done in order to determine whether an individual unit is defective, which means the defect already occurred.
Appraisal costs are the costs that are incurred in order to determine if an individual unit is defective. Inspection of incoming raw materials is done in order to determine if any of the raw materials are defective, so it is an appraisal cost.
Internal failure occurs when a problem is detected after production but before shipment to the customer. Inspection of incoming raw materials takes place before production.
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