Appraisal Costs Definition

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 29, 2023

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Appraisal costs are the expenses incurred during quality control processes. These costs can include equipment, materials, inspections, and testing to ensure compliance with quality standards.

Appraisals are necessary for quality control purposes because they help identify defects in products or services before reaching customers.

The cost of an appraisal varies based on various factors, including what is being appraised and how it will be used.

Importance of Conducting Appraisals

There are several different reasons for appraisal.

  • Appraisals help identify product defects, ensure compliance with quality standards, and determine whether products meet your organization's standards.
  • Appraisals are necessary for organizations seeking to improve business processes and increase customer satisfaction.
  • Appraisals are a necessary component of any business as they help keep those mistakes on quality standards from being seen by customers.

Appraising your products and services with the right caliber of individuals is important for ensuring that you have an eye on quality control throughout this process, assuring both you and potential clients that your product or service meets predetermined standards.

Appraisals should not be overlooked, as they can make or break a company. Appraisals are carried out to measure the quality of services and products, giving us an idea about whether a product is safe for customers.

How Does Appraisal Cost Factor Into The Quality Control Process?

Appraisal costs factor into the quality control process by helping to identify defective products and services before they reach customers.

Appraisals also help determine whether a product or service meets your organization's standards for acceptable performance.

Appraisal costs should be factored into the quality control process because they can help improve business processes and increase customer satisfaction. The cost of an appraisal varies based on what is being appraised and how it will be used.

For example, there may be one set price for an inspection that takes three hours with five people involved. At the same time, another might require multiple inspections carried out by numerous individuals over several days at separate sites, resulting in higher fees.

Example of Appraisal Costs in Quality Control

Several factors can drive appraisal costs, but what's most important is the industry.

The type and size of an appraisal will depend on where you are and market cycles for each specific profession or trade in which they're employed within their particular company structure - this includes appraisers too.

The cost of an appraisal is determined by what it takes to inspect the materials that have been received from suppliers.

For example, when a large widget manufacturer delivers faulty widgets to you, which results in returned products or filed complaints against you, many people switch their loyalty to find something more reliable and quality products.

The next time the new shipment of widgets comes in, you open the boxes, inspect each widget to make sure they are not faulty, and then repackage them before selling to the customers.

This process costs time and money, which is included on the balance sheet as an appraisal cost.

Other examples of appraisal costs include:

  • Inspection fees
  • Testing and sampling costs
  • Equipment replacement or repair costs
  • Tools and supplies needed to complete the inspection
  • Downtime costs for equipment that must be shut down to perform inspections/tests
  • Lost production or efficiency costs associated with stopping/starting equipment
  • Manpower and labor costs for inspectors, testers & samplers
  • Facilities fees for setting up testing equipment in a controlled environment

Quality assurance and control is the next best thing to incur appraisal costs.

This includes increasing production processes at all suppliers and company-wide improvements so that defective parts cannot be produced within any stage of the production process or supply chain.

Like a final product, consumer goods producers should ensure quality materials are used throughout their supply chains to ensure customers receive quality rather than defective goods.

The Most Common Reasons For Higher Appraisal Costs

There are several reasons appraisal costs can be higher than usual. The most common reasons are:

  • The value of the item has changed since it was previously appraised (for example, if an appraisal was done on antique furniture five years ago and now there's been a significant increase in demand)
  • Appraisals can be time-consuming depending on how complicated or unique the item being sold or purchased is, so this may cause prices to rise accordingly.
  • Appraisals for items used in artistic works may be exceptionally high because appraisal costs include the cost of a specialized art appraisal.
  • Appraisal cost can depend on how complicated or unique an item is, so if you're selling or buying something more difficult than average, it will require additional appraisal time and therefore increase your appraisal costs.
  • When you need an appraisal done at a specific location, it will increase the appraisal cost because this requires additional travel and labor hours from the appraiser.

Tips for Appraisal Cost Reduction

There are several ways appraisal costs can be reduced, including:

  • Hiring someone qualified and experienced in appraisal costs, so they know how to reduce them or even, if possible at all, for your specific item.
  • Getting appraisal costs done in bulk can reduce appraisal costs significantly.
  • Hiring a local appraisal company can reduce appraisal costs significantly. Local appraisal companies will know the appraisal costs in your area and may be more willing to accept lower appraisal fees.
  • Having appraisal costs done as soon as you make a purchase or sale is essential to save on appraisal costs.

Although appraisal costs can fluctuate depending on market demand, it's best to get appraisal costs done as soon as possible after making a purchase or sale.

Appraisal Costs FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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