In response to intensive foreign competition, the management of Florex Company has attempted over the past year to improve the quality of its products. A statistical process control system has been installed and other steps have been taken to decrease the amount of warranty and other field costs, which have been trending upward over the past several years. Costs relating to quality and quality control over the last two years are given below: Costs (in thousands) Inspection Quality engineering Depreciation of test equipment Rework labor Statistical process control Cost of field servicing Supplies used in testing Systems development Warranty repairs Net cost of scrap Product testing Product recalls Disposal of defective products Last Year $ 810 This Year $ 1,152 $ 540 $ 810 $ 675 $ 270 $ 1,170 $ 0 $ 1,890 $ 405 $ 1,440 $ 45 $ 630 $ 3,870 $ 1,260 $ 63 $ 900 $ 1,710 $ 630 $ 1,260 $ 990 $ 1,440 $ 2,610 $ 900 $ 1,080 $ 900 Sales have been flat over the past few years, at $90,000,000 per year. A great deal of money has been spent in the effort to upgrade quality, and management is anxious to see whether or not the effort has been effective. Prevention costs: Total prevention costs Appraisal costs Total appraisal costs Internal failure costs: Florex Company Quality Cost Report Last Year This Year Amount (in Percent of Amount (in thousands) Sales thousands) Percent of Sales 0 0.00 0 0.00 0.00 0.00 Total internal failure costs 0 0.00 0.00 External failure costs: Total external failure costs 0 0.00 0 0.00 Total quality cost