Question 13 Jane is a university graduate who has decided to invest on business of buying and selling animal feeds packed in sucks containing 25kgs each. She sells each suck to the customers at Moshi Kwa Sadala at TZS 60,000. She buys each suck from Kijenge Animal Feeds Company at TZS 40,000 and because she has no idea of the inventory management fields, she believes that her profit is TZS for each suck and since she sells 3,000 sucks a year then for her a profit margin of TZS 60 million is earned each year. However, she has recently experienced that her company has incurred significant losses because, the actual money is not equating to the estimates. You have been consulted by her and you have discovered that each year she spends TZS 1,000 to keep one suck in a public warehouse located nearby. She also uses TZS 500 to order each suck. Required Is her profit estimate right? If not what is the right estimate? What is the optimal order for Jane? What is the Total incremental cost incurred by Jane’s business? What is the maximum inventory that Jane is supposed to keep? What is the average stock for Jane’s company?
