Quality cost analysis in IS0-9000-certified Turkish companies Muhsin Halis Economics and Business Management School, Gaziantep University, Gaziantep, Turkey Ahmet Oztas Civil Engineering Department, Gaziantep University, Gaziantep, Turkey Introduction In the early days of quality management, quality costs were regarded as the cost of scrap, rework, inspection plus the costs of running the quality department. The definition and importance of quality costs changed the total quality management perceptions. The first attempt at a scientific approach to quality costs was made in the 1950s. It was Juran who brought out his perception about quality costs, and he made it clear that quality cost is not the cost of running a quality department. His view was thattherearecoststhatcouldbeavoidedata reasonable expense and ones that it is economicallyinefficienttoavoidHwangand Aspinwall, 1999, p. 950). In the 1950s, the quality costs were classified into four main categories by some scientists Feigenbaum, 1983; Juran and Gryna, 1993; Masser, 1957) as prevention, appraisal, internal failure and external failure costs. Internal failure costs are associated with reworking or scrapping the nonconformingunitsbeforetheyareshipped to the customers. External failure costs are incurred after the products are delivered to the customer, such as warranties and litigation costs. Appraisal costs also called inspection costs) are incurred by identifying defectiveproductstodeterminethedegreeof conformance to product specifications. Prevention costs are related to the efforts to prevent non-conformance expenditures. In 1967 the American Society for Quality Control presented Feigenbaum's work in a more systematic approach, publishing Quality Costs ± What and How. Another approach to give directions on how to measure and use quality costs was the publication of the BS 6143 guide BS 6143-2, 1990)tothedeterminationanduseofquality- related costs. The standard uses the ``prevention, appraisal and failure'' classification to identify and allocate the quality costs. The latter uses Crosby's 1979) ideas of determining the quality costs in two categories: the price of conformance and the priceofnon-conformance.Insteadoftheterm ``price'', the term ``cost'' is used in British Standards. In today's globally competitive markets, both managers and academicians recognise quality as a critical factor in company's performance. One of the critical aspects of quality is how to measure and report the related costs. Some writers Tatikonda and Tatikonda, 1996) discuss this issue in detail and conclude that mismeasurement of these costs may lead to suboptimal managerial decisions. They state that the traditional quality cost models do not fully reflect the real quality costs, and do not propose a costing system that encompasses both the traditional and opportunity costs. The growth and the survival of the companies depend on being customer oriented and on the ability to produce fast andwithlowcost.Forthisreasoninorderto accomplishqualityingoodsandservices,the application of ISO 9000 Oztas and Ulusoy, 2000), which is a kind of warranty given systematically by third parties, is an important step for the company. That is, for perfect goods and services the systems must also be perfect. And the perfectness of the systemliesinthecontrolandcertificationof third parties. All expenses incurred for certification and continuous improvement should be determined seriously and systematically. This means that ``write what you think, do what you write and determine thecostofyouraction''logicshouldserveas a basic in taking actions Halis, 2000). Scope and methodology The aim of this study is to determine the quality costs in business organisations havingISO9000certificate,derivingfromthe application of the standards. The objectives are to determine both the reasons for implementing ISO 9000 and the factors The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0268-6902.htm [101] Managerial Auditing Journal 17/1/2 [2002] 101±104 # MCB UP Limited [ISSN 0268-6902] [DOI10.1108/02686900210412315] Keywords Total quality management, Quality assurance, Cost of quality, Cost/benefit analysis, Turkey Abstract The aim of this paper is to determine the quality costs in ISO-9000-certified business organisations deriving from the application of the standards. In the beginning, the quality costs in implementing ISO-9000 are investigated. The importance of the quality cost system is emphasised. Then, a quality cost system is proposed and quality cost analysis is performed on ISO-9000-certified Turkish companies. To determine the quality cost data, a questionnaire was prepared and sent to the selected companies. Collected quality costs data were then analysed using a number of analysis methods.