Abstract

Over the years, few organizations have adopted a reliable method for measuring and reporting cost of quality (COQ) and used it to improve operations. Since the avoidance of reduced profits from quality initiatives is seldom measured or reported by organizational financial accounting systems, the magnitude of benefits in financial terms cannot easily be quantified. Activity based cost/management systems can be used to accurately report the cost of poor quality by replacing broadly allocated indirect expenses with cost drivers having cause and effect relationships. The addition of valid costing data will give the quality movement additional legitimacy.