Quality Production in a nutshell

There is a lot of confusion about how the quality mechanic works in Factorio: SA. While the original FFF post did a good job explaining the benefits of quality materials, I still see many people unsure or confused about how producing quality goods works. Some information is scattered beyond the original FFF post, as various clarifications have been posted in comments and Discord messages. So let this be an attempt to explain the mechanics of producing quality items in one place.

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