As part of his efforts to improve the efficiency of the distribution activities at Zecon, Mr. McDowall is also expecting that the new order processing system will help improve some of the service failures they have been experiencing. Recent analysis reveals that 10% of all orders processed result in either an on-time delivery failure, or an order-fill failure, and Mr. McDowall is hoping that the new system will help the company process orders faster and more accurately. Although a 10% service failure might not seem alarming to senior management, Mr. McDowall would like to quantify the cost of their current service failures so as to demonstrate the impact to his team. This will also serve as a good baseline for assessing future improvement once the new operating system is installed. Use the following information: Selling price per order Gross Margin per order Annual Orders Service Failure Rate Refused Orders (% of Service Failures) Rectified Orders (% of Service Failures) Rehandling Cost (per order) Invoice deduction per service failure $200 $100 1,000,000 10% 20% 80% $130 $50 To Do: a) Analyse the financial impact of service failures at Zecon, based on the data provided [5 Marks] b) If Mr. McDowall wanted to incorporate the costs of the service failure in to the ROA analysis completed in Problem #2, which elements of the ROA model would be impacted by a reduction in the service failures, and how? (this does not require financial analysis, just an explanation of how the improved system would change the ROA for the firm). [5 Marks]