Capability template for quality management
Cost of poor quality worksheet
An owner or operations lead who senses that rework, scrap and returns are costly gets one worksheet: the failure costs already on record, sorted by category, with estimates, gaps and unresolved allocations listed. The owner decides what to fix first.
Listed under
Add it to a workflow in the Fully Powered Planner, beside the teams and roles that will run it. Book a fit call
The outcome
Most owners can feel what rework, scrap and returns cost long before anyone has added it up. The figures live in different places: a timesheet note here, a stock write-off there, a credit note in the accounts, a courier invoice nobody split. This capability template gathers what is already on record into one worksheet for a period.
Every cost is shown with how it is known: recorded in the books, or estimated from hours and an approved rate. A cost nobody has put a figure on stays unknown and is listed as such; it is never counted as zero. Costs that cannot yet be assigned to a category or a product are listed as unresolved allocations, and rows that look counted twice are held out for a person to confirm.
The worksheet shows where the known cost sits. It does not say what to fix first, and it claims no saving. The owner decides, with finance confirming the cost basis.
Who starts the work, and when
The owner, operations lead or quality lead starts it when failures keep recurring and nobody can say what they add up to, before a planning or pricing round, or on a set rhythm such as each quarter. A finance contact reviews the cost basis before anyone acts on the figures.
What they supply
- The failure cost export for the period, as a spreadsheet: one row per rework, scrap, return, credit or replacement, with its date, category, process or product, hours or amount, and where the figure came from.
- Prevention and appraisal costs, if the business tracks them: training, calibration, inspection and similar, as a second export.
- Their settings: the period, the currency, the category list, the approved hourly labor rate if there is one, and the costing rules finance has agreed, such as how a credit note is counted.
What comes out
One worksheet in a fixed order: known failure cost by category, split into internal and external failure; where the known cost sits by process or product; estimated costs with their hours and rate; rows with no cost; unresolved allocations; possible duplicates held out; prevention and appraisal costs as supplied; the assumptions used; rows left out of the period; and numbered questions.
Each total is shown with how much of it is recorded and how much is estimated, so a reader can see how firm the number is.
An invented example
Illustrative example with invented data. Orrin Hollow Workshop, its products, documents and figures below are all invented. The inputs come first, then the worksheet.
What the owner supplies
Failure cost export. One row per failure cost, July to September 2026.
record_ref,date,category,process_or_product,description,quantity,hours,cost_amount,cost_basis,source_ref
F01,2026-07-08,Rework,Door line,Re-sanded doors after a finish flaw,40,12,,Estimated,TS-1
F02,2026-07-15,Scrap,Door line,Warped panels binned,18,,1260.00,Recorded,SW-3
F03,2026-07-22,Rework,Drawer units,Re-drilled runner holes,25,9.5,,Estimated,TS-2
F04,2026-07-29,Customer return,Drawer units,Return freight and handling for 6 units,6,,540.00,Recorded,RT-11
F05,2026-08-03,Credit or refund,Drawer units,Credit note for 6 returned units,6,,1710.00,Recorded,CN-204
F06,2026-08-05,Scrap,Wardrobe frames,Frames binned after a wrong cut list,4,,2240.00,Recorded,SW-4
F07,2026-08-12,Scrap,Wardrobe frames,Offcut waste after a wrong cut list,,,2240.00,Recorded,SW-4
F08,2026-08-19,Rework,Wardrobe frames,Recut and reassembled 3 frames,3,14,,Estimated,TS-5
F09,2026-08-26,Re-inspection,Door line,Second inspection of 60 doors after the finish flaw,60,6,,Estimated,TS-6
F10,2026-09-02,Replacement,Wardrobe frames,Replacement frame shipped to a customer,1,,610.00,Recorded,RP-7
F11,2026-09-09,,Drawer units,Courier invoice covering returns and replacements; not split,,,380.00,Recorded,INV-908
F12,2026-09-16,Scrap,,Month-end scrap write-off; not split by product,,,1350.00,Recorded,SW-9
F13,2026-09-23,Rework,Door line,Repainted doors,22,8,,Estimated,TS-8
F14,2026-09-25,Rework,Drawer units,Rework on returned units,6,,,,
F15,2026-06-28,Scrap,Door line,Trim offcuts binned,30,,700.00,Recorded,SW-1
Prevention and appraisal costs.
cost_ref,date,category,description,cost_amount,cost_basis,source_ref
P1,2026-07-10,Prevention,Operator training day on finishing,480.00,Recorded,TR-2
P2,2026-08-14,Appraisal,Gauge calibration service,220.00,Recorded,CAL-5
P3,2026-09-12,Appraisal,Inspector time on final checks,,,
Settings. Business: Orrin Hollow Workshop. For: Owner. Period 2026-07-01 to 2026-09-30. Currency: dollars (printed with the $ symbol). Today: 10 November 2026. Categories: the defaults. Approved costing basis, in the finance contact's words: labor at $32.00 an hour, wages only; a credit note is counted at its credited value; a return is counted as freight and handling only, without the value of the returned stock.
The worksheet
COST OF POOR QUALITY WORKSHEET: Orrin Hollow Workshop, 2026-07-01 to 2026-09-30
For: Owner. Prepared 2026-11-10 from 15 failure rows read, including any outside the period, and 3 prevention and appraisal rows read. Currency: dollars.
Coverage: 14 failure rows in the period; 1 held out as a possible duplicate; 13 counted, of which 12 have a known cost and 1 has none.
1. Known failure cost by category
Internal failure
Rework: 5 rows, known cost $1,392.00 ($0.00 recorded, $1,392.00 estimated); 1 row with no cost.
Scrap: 3 rows, known cost $4,850.00 ($4,850.00 recorded, $0.00 estimated); 0 rows with no cost.
Re-inspection: 1 row, known cost $192.00 ($0.00 recorded, $192.00 estimated); 0 rows with no cost.
Internal total: $6,434.00
External failure
Customer return: 1 row, known cost $540.00 ($540.00 recorded, $0.00 estimated); 0 rows with no cost.
Credit or refund: 1 row, known cost $1,710.00 ($1,710.00 recorded, $0.00 estimated); 0 rows with no cost.
Replacement: 1 row, known cost $610.00 ($610.00 recorded, $0.00 estimated); 0 rows with no cost.
External total: $2,860.00
No category: 1 row, $380.00.
Total known failure cost: $9,674.00 ($8,090.00 recorded, $1,584.00 estimated). Rows with no cost: 1.
2. Where the known cost sits
Wardrobe frames: $3,298.00, 34% of the known total; 0 rows with no cost.
Drawer units: $2,934.00, 30% of the known total; 1 row with no cost.
Door line: $2,092.00, 22% of the known total; 0 rows with no cost.
Not assigned to a process or product: $1,350.00, 14%.
Shares are of known cost only. The order is not a priority.
3. Estimated costs
F01, Rework, Door line: 12 hours x $32.00 = $384.00.
F03, Rework, Drawer units: 9.5 hours x $32.00 = $304.00.
F08, Rework, Wardrobe frames: 14 hours x $32.00 = $448.00.
F09, Re-inspection, Door line: 6 hours x $32.00 = $192.00.
F13, Rework, Door line: 8 hours x $32.00 = $256.00.
Estimated total: $1,584.00.
4. Rows with no cost
F14, Rework, Drawer units: Rework on returned units. Missing: no amount, no hours and no basis.
5. Unresolved allocations
F11, $380.00: no category; the description says the courier invoice covers returns and replacements and is not split. Counted in the total as "No category" and under Drawer units.
F12, $1,350.00: no process or product; the description says the write-off is not split by product. Counted in the total under Scrap and as "Not assigned to a process or product".
6. Possible duplicates held out
F07, $2,240.00: shares SW-4 with F06. Counted once. Total known cost if the held-out row were also counted: $11,914.00.
7. Prevention and appraisal costs, as supplied
P1, Prevention, Operator training day on finishing: $480.00.
P2, Appraisal, Gauge calibration service: $220.00.
P3, Appraisal, Inspector time on final checks: no amount.
Known total: $700.00. Rows with no amount: 1. Shown beside the failure costs, not netted against them.
8. Assumptions used
Period 2026-07-01 to 2026-09-30, in dollars.
Labor is estimated at $32.00 an hour, wages only, as supplied by the finance contact.
A credit note is counted at its credited value. A return is counted as freight and handling only.
When two rows share a source reference and an amount, the lower record reference is counted and the other is held out.
9. Rows left out of the period
F15, 2026-06-28, $700.00.
10. Questions
1. F07 and F06 both cite SW-4 for $2,240.00. Is this one write-off entered twice, or two separate write-offs?
2. F11, $380.00: how is the courier invoice INV-908 split between returns and replacements, and which category does each part take?
3. F12, $1,350.00: which products does write-off SW-9 cover?
4. F14: what did the rework on the 6 returned units cost, in hours or in an amount?
5. The estimated labor in section 3 is wages only at $32.00 an hour. Does finance want any other labor cost included before the figures are used?
6. P3: what did the inspector time cost?
Draft for the Owner's review. Nothing has been changed, sent or recorded. The cost basis needs the finance contact's confirmation. No saving is claimed, and no priority is set.
Every figure in the worksheet comes from the rows and settings above. The checks: the 15 rows less F15 outside the period give 14 in the period; F07 is held out, leaving 13 counted, of which F14 has no cost. Recorded: $1,260 + $540 + $1,710 + $2,240 + $610 + $380 + $1,350 = $8,090. Estimated: 49.5 hours x $32.00 = $1,584. Together $9,674, which is also $6,434 internal + $2,860 external + $380 with no category, and also $3,298 + $2,934 + $2,092 + $1,350 by product. With F07 added, $9,674 + $2,240 = $11,914.
Where it fits
- Quality management, where failures are recorded and where the cost of repeating them is rarely seen in one place.
- Operations and process improvement, which owns the processes the worksheet points at.
- Finance and accounting, which confirms the cost basis before the figures are used.
- Manufacturing, where scrap and rework are counted in hours and materials.
- Construction, where redoing work on site is the common failure.
- E-commerce and retail, where returns and credits are the visible cost.
- Established businesses, where years of records exist and nobody has added them up.
- Growth and scaling, when the volume of work grows faster than the checks on it.
What has to change for your company
Agree your categories before the first run and keep them stable, because the totals are only as good as the labels. Decide with finance which costs count: whether a credit note is counted at its value, whether a returned item's lost value is included, and whether an hourly rate covers wages only. Set the period and how often it runs. Decide who reads the worksheet and who may see it. It runs in ChatGPT, Claude, Copilot or Gemini, from the exports you supply; it needs no access to any system.
For a single product's import costs, use product landed cost worksheet. For why actual spending differs from plan, use budget versus actual variance commentary. This one is about the cost of failures only.
What has been checked
Fully Powered AI wrote this capability template. It was editorially reviewed on 10 November 2026. It was tried once, with Claude, on its invented example on 10 November 2026; no stop condition was exercised in that run, and the record is published with it. It has not yet been tested in a client environment. It has not yet been tested as a packaged version in ChatGPT, Claude, Copilot or Gemini.
Testing in your environment means running it on a past quarter your finance contact already knows, plus cases written in advance: a column renamed in the export, a row with hours and no rate, the same write-off listed in two exports, a cost with no category. Finance checks every total against the books before anyone relies on it. Pilot acceptance-test preparation builds that test set, and what we test before we call an AI workflow ready describes the record we keep.
The full capability template
Everything above is the outline. The complete capability template is the working version: the roles, the inputs, the procedure, the exceptions and stop conditions, the output format, the reviewer checklist, the acceptance tests, the instructions for an AI assistant and what to customize for your company. It comes with a download and the link to its folder in Fully Powered’s public repository.
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