In this paper I examine factors that influence the use of quality cost in TQM (Total Quality Management) environments by using survey data collected from Japanese manufacturing firms. The management accounting and quality management literature suggests that TQM emphasizes nonfinancial performance measures, such as defect rates, cycle time, and customer satisfaction, to identify the sources of defects, monitor the consequences of improvement activities, communicate strategic goals, and motivate employees to improve the quality of products and processes. Some argue that traditional management accounting practices based on mainly financial performance data are too slow and aggregated to support TQM practices and that nonfinancial performance measures should be emphasized to overcome the shortcomings of traditional financial performance measures. The results of the present study indicate that quality costs are used in particular situations even in TQM environments. Specifically, the results show that firms with a high degree of quality risk, shortened product development cycles, inspections, and interdependence among units are likely to use quality cost in TQM environments. This study contributes to the existing literature by providing empirical evidence of the factors influencing the use of quality costs in TQM environments. The results of this study provide new insight into the choice of performance measures in TQM environments.
Keywords: Total quality management, quality costs, conformance costs, nonconformance costs