Taguchi measured quality as the variation from the target value of the design specification and then translated that variation into an economic "loss function" that expresses the cost of variation in monetary terms.
The loss function is represented by: L(x) = k(x - T)2
x is any value of the quality characteristic. k is a constant. (x - T) is is the deviation from the target. Loss increases by the square of the deviation.
k = the cost divided by the deviation (x - T)2