Diagnosis of a 120-kW air-cooled air conditioning system under faulty conditions was performed using modified productive structure analysis. Unit cost of cooling capacity for the system and lost cost flow rate for components were calculated based on data obtained by using a simulator for the cases of pre-fixed faulty and normal operating conditions. The relative malfunction (RMF) and the relative difference in the lost cost flow rate between real and normal operations (RDLC) were found to be effective indicators to identify the malfunction components. Results revealed that malfunction due to fouling at the condenser and evaporator, compressor valve leakage, the superheating in the suction line and refrigerant undercharge, whose fault levels by the percent degradation induced in the cooling capacity are 3.4%, 10.5%, 15.1%, 3.5% and 4.1%, respectively, can be identified. Unit cost of the cooling capacity of the system increases when malfunction occurs at any component in the air conditioning system.