eBookItem 3Item 3 Problem 1A-4 Quality Cost Report [LO1-7, LO1-8] 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 Inspection $ 750 $ 900 Quality engineering $ 420 $ 570 Depreciation of test equipment $ 210 $ 240 Rework labor $ 1,050 $ 1,500 Statistical process control $ 0 $ 180 Cost of field servicing $ 1,200 $ 900 Supplies used in testing $ 30 $ 60 Systems development $ 480 $ 750 Warranty repairs $ 3,600 $ 1,050 Net cost of scrap $ 630 $ 1,125 Product testing $ 810 $ 1,200 Product recalls $ 2,100 $ 750 Disposal of defective products $ 720 $ 975 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