Date of Award
Master of Business Administration
The focus of this study was to determine if t he use of a quality cost measurement system will allow companies to track and analyze costs and provide a means of improving profitability. Focusing on the philosophies and theories developed by W. Edwards Deming, J .M. Juran, and Philip Crosby, three of the leading authorities in the quality control field, a quality control system can be designed to track and analyze quality costs. Quality costs have been grouped into three categories : Prevention costs, Appraisal costs, and Failure costs. Prevention costs are those associated with preventing poor quality such as, new machinery, inspections, and training. Appraisal costs are associated with analysis of finished products and other such functions. Failure costs are divided into two further categories: Internal failure and external failure. Internal failures occur as a result of problems within the company. External failures are caused by problems with raw materials from suppliers or problems with consumers. Failure costs include such items as scrap, rework of product, and placating irate customers. The purpose of this study was to determine if a correlation exists between quality cost measurement and profitability. Information was gathered through secondary data collection, Magazine articles and published studies were the primary source of secondary data. Hypothetical case scenarios were also utilized.
The following hypothesis was tested: If quality costs are tracked and analyzed, they can be controlled in order to increase profitability.
Results of the analysis failed to supply sufficient information to support t he hypothesis completely , but a positive correlation between quality cost measurement and profitability was revealed. Because of insufficient data, it was concluded that the study needed to be revised by changing the sampling frame and determining more useful analysis calculations.
Boehm, Daniel J., "The Use of Quality Cost Measurement Systems for Improving Profitability" (1990). Theses. 382.
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