I was able to figure it out. I have been using the Auto-Focus feature to determine material height since I purchased the machine. While this has been working flawlessly previously, it turns out that the glass lens that covers the red laser beam (for auto-focus) has become clouded with smoke residue inside of the lens. I also found dust particles in there as well with no way of cleaning it out directly but fortunately it does blows away with compressed air.
Note, this is not the main laser lens, but one of the smaller side ones; the smoke/dust is INSIDE the lens, not outside.
I think the reason smoke residue is inside the lens is because one of the 3 holes surrounding the lens is not filled with glue/sealant while the other side (sensor) is sealed. Seems like it might be a defect with my machine.
Before cleaning, the 1/4" material would barely cut at 115-120/Full and charred the cuts quite a bit. After cleaning the dust particles, Auto-Focus does work again but not optimally (need 125/Full to cut). Using manual material height lets the machine cut like normal (130-135/Full).