AbstractThis paper develops an integrated systems approach towards quality and cost in production systems. A spinning unit producing medium count ranges of yarn, has been taken as a case for study. The first part deals with developing a suitable methodology for the purpose by modifying the existing physical system theory modelling framework. The second part deals with the aspect of simulation for studying the impact of various processes and the quality of the output. Finally, the response of cost of output to the quality of output has been studied using the modified cost equation and carrying out the sensitivity analysis.