Harvey Company designs and produces surgical lasers. Its product is brilliantly designed, but the manufacturing process has been plagued by chronic quality control problems. To help address the situation, Harvey formed a cross-functional team of managers that quantified its costs of quality over the last two quarters as follows: Cost of testing equipment Customer returns of defective goods Downtime due to quality problems Inspection Net cost of scrap Product recalls Quality engineering Rework labor Statistical process control Supplies used in testing Systems development Warranty repairs Costs (in thousands) Quarter 2 Quarter 1 $270 $3,200 $600 $1,700 $800 $3,500 $1,080 $1,400 $0 $30 $120 $390 $200 $1,100 $2,770 $1,300 $600 $1,650 $1,600 $270 $40 $680 $2,800 $3,300 The company's sales were $95 million in Quarter 1 and $100 million in Quarter 2.

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