• Change the order of your test data and see of this solution works:

    DROP TABLE #TestData

    CREATE TABLE #TestData

    (

    Product NVARCHAR(100),

    Parts NVARCHAR(100),

    Status NVARCHAR(100)

    )

    INSERT INTO #TestData(Product,Parts,Status)

    SELECT 'Laptop1','mouse','OK' UNION ALL

    SELECT 'Laptop1','screen','OK' UNION ALL

    SELECT 'Laptop1','button','OK' UNION ALL

    SELECT 'Laptop2','mouse','OK' UNION ALL

    SELECT 'Laptop2','button','NOT OK' UNION ALL

    SELECT 'Laptop2','screen','OK'

    “Write the query the simplest way. If through testing it becomes clear that the performance is inadequate, consider alternative query forms.” - Gail Shaw

    For fast, accurate and documented assistance in answering your questions, please read this article.
    Understanding and using APPLY, (I) and (II) Paul White
    Hidden RBAR: Triangular Joins / The "Numbers" or "Tally" Table: What it is and how it replaces a loop Jeff Moden