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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) Last Year This Year 600 780 Inspection 360 675 Quality engineering 255 150 Depreciation of test equipment Rework labor 1,200 1,740 225 Statistical process control 1,125 1,050 Cost of field servicing 45 Supplies used in testing 45 540 750 Systems development 3,150 1,350 Warranty repairs 630 $1,200 Net cost of scrap 900 1,650 Product testing Product recalls 2,625 750 810 1,020 Disposal of defective products Sales have been flat over the past few years, at $75,000,000 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