One of the most popular topics in the field of management accounting or cost management in Japan is quality costing which evaluates the effectiveness of quality management through depicting quality in terms of cost measures. In this way it can help improve such activities. Until recently Japanese business made little use of this costing technique despite their efforts to improve quality: only a few accurately grasped how essential cost is to these efforts. More recently, several Japanese companies have begun setting up quality cost systems. By so doing they have identified the important problems that arise from these systems. This paper traces the historical development of this costing technique in the U.S.A. and Japan and reviews its basic concepts and philosophies. On the basis of the experiences of two Japanese companies it discusses what is needed to develop quality costing as a strategic cost management tool. The nature of strategic cost management has not been established precisely. The various requirements assigned to it by different authors may be summarized in the following two definitions. First, strategic cost management can interpret ways of effecting cost reduction in order to improve profitability of individual products or product groups at early business-process stages such as product planning, research and development and designing, when the greater part of product life-cycle costs are settled. Second, it entails a political or intentional use of cost information for the sake of organizational reform or change at another phase. The latter half of this paper identifies which of these features can be found in Japanese quality cost systems. The following discussion emphasizes differences between management systems in Japanese and Western companies and the ways in which quality management and cost management are perceived in Japan and the West. However, the conclusions this paper draws are applicable not only to Japanese business but to companies in other countries as well.
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