Quality costing

This chapter deals with the fundamentals of quality costing. The measurement and management of quality costs is an interesting issue for several reasons. First of all, quality costing is a cost management tool which requires a strong integration of accounting with other specialisms. These specialisms often have a functional background, for instance engineering. Second, there is potential for many organizations to use this tool due to its great potential impact on performance: an impact that can be found both in relation to revenue, since quality can be used to position the products, and in relation to net cost reductions. Although there is strong evidence of quality costing in practice (e.g. Dale and Plunkett, 1999; Shotmiller and Campanella, 2007; Tennucci et al. 2010), it does not exist, by any means, in all companies and there may be scope for its greater use. Third, there are well known, expected relationships among categories of quality costs on which managers could base their quality cost reduction initiatives. The fi rst part of the chapter examines the basic concepts proposed in the literature about quality costs i.e. their defi nition, classifi cation and the relationships among the categories of costs for prevention, appraisal and failures. The second part analyzes the value and use of quality costing in practice. Finally, some conclusions are drawn and future research considered.