Activity-based costing approach in the measurement of cost of quality in SMEs: a case study

Since the 1950s, a considerable amount of attention has been given on the cost of quality (CoQ) in theory and in practice. Overall, it is argued that a precise measurement of the CoQ requires a well-established accounting system that provides accurate cost information. However, in the literature, it is generally considered that traditional cost accounting methods do not provide accurate cost data for the measurement of quality costs. Therefore, the aim of this study is to explore the role of activity-based costing (ABC) in supporting the measurement of CoQ in small and medium-sized enterprises in order to discuss the results of implementation, its benefits and drawbacks. Overall, it was found that the use of ABC in the CoQ measurement provides the organisation with the means to determine both value-added and non-value-added quality-related activites and to detect improvement opportunities in the production process.