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What Is an Appraisal Cost?

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  • Written By: Alex Newth
  • Edited By: Angela B.
  • Last Modified Date: 26 November 2016
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Quality control is a common part of doing business and, to keep a product’s quality high, businesses spend money to stave off defects. An appraisal cost is the total amount of money a business spends to inspect a product and confirm its quality. This is often paid to specialized inspectors and also includes the money needed for testing, such as crashing a car intentionally to test safety. Another aspect of appraisal cost deals with regular consumers who are contracted as secret shoppers to test a store’s quality on various levels. Some businesses regularly use testers and allocate a significant appraisal cost budget for each product, while others use fewer inspectors and place the responsibility on workers.

Whether a consumer is buying an expensive product or a cheap one, he or she expects that product to be free of errors and problems. To meet this expectation, businesses perform quality control tests, checking for any errors in design, functionality or safety. Inspecting a product after it is manufactured allows testers to work out the defects in the original product before it is ever shipped to a customer.

All inspection work and its associated costs are placed under the umbrella of appraisal cost. This pays for the inspector's salary and any tests that are performed to check for or fix defects. These testers have specialized knowledge about regulations, rules and laws concerning the product.

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The testing and inspecting that occurs with products usually involves using the product to extremes. For example, a tire will be placed in a mechanism that simulates driving and will typically run up high miles, so inspectors can check the tire for errors stemming from use. Products also may be crashed to check for safety, or the product may be taken apart to see what parts comprise the product and if there are any potential problems or weaknesses in the product’s design.

Aside from specialized inspectors, companies also hire general consumers as secret shoppers. The secret shopper is paid a nominal amount of the appraisal cost to perform a quality control task. He or she goes into a business and performs a purchase. After the purchase is finished, he or she completes a form or checklist detailing whether employees did everything they were supposed to or if they went against company protocol.

While the appraisal cost method of finding defects is helpful, many businesses try to get the same quality control performance without the cost. Business owners will ask employees to be responsible for errors and to report when defects are discovered. This allows the owner to spend less money on inspectors.

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