Place your answer in a provided table and answer each given question using your solution on the table. Paper.com Colleen Starkey never thought she could sell paper products to consumers on the internet. Paper.com specializes in shipping paper-related products from numerous suppliers to customers, including diapers, paper towels, and facial tissue. Because these items have a tiny margin, Colleen knows she needs to control costs and simultaneously have high service levels. Paper.com receives 900,000 orders annually, with an average revenue per order of $200 and a cost of goods per order of $120.00. Paper.com's current order fill rate is 94%. Colleen estimates that of the orders not filled correctly or completely, 30% of the customers cancel their orders, and 70% will accept a reshipment of the correct/unfilled items. This rehandling costs Paper.com $30 per order. To retain customers, Paper.com reduces the invoice value of rehandled orders by $40. Paper.com pays $5,000,000 for inbound and outbound transportation from its warehouses. Its warehousing costs are $1,500,000 annually. In addition, Paper.com has $10 million of debt at an annual interest rate of 8%. Other operating costs are $2 million annually, and Paper.com maintains $300,000 in cash at all times. Paper.com has an average inventory of 90,000 units. This inventory level is necessary to help fill consumer orders correctly the first time. The inventory carrying cost rate per unit is 10% of the price. Its accounts receivable average $ 700,000 annually. Colleen has decided that a 94% order fill rate is unacceptable in the market and lost customers and rehandled orders negatively affect profits. She has decided to rent a new warehouse stock locator system and pay $0.8 million per year, increase inventories by 10%, and improve the on-time delivery of inbound shipments by contracting with a new carrier. This carrier upgrade will increase total transportation costs by 15%. Colleen hopes these changes will increase the order fill rate to 98%. Paper.com faces a current tax rate of 40%. You are the logistics analyst at Paper.com and have been asked to do the following: Question: a) Calculate the financial impact of increasing the order fill rate to 98% from 94%, and write your answer using the given table. b) Describe what your suggestion is. Hint: For the 98% case, use the information given below. 1. Assume that the company borrowed $0.8 million for a new stock locator system from the bank. a) Annual Orders Orders Filled Correctly Service Failure Orders Lost Sales Orders Rectified orders Net Orders Sold Sales (Revenue) Less: Invoice deduction Loss sales revenue Net Sales (revenue) Cost of Goods Sold Gross Margin Rehandling Cost Transportation Warehousing Inventory Carrying Other Operating Cost Total Operating Cost EBIT Interest Tax Net Income b) 94% 99%