Sumatra Bakery and Confectionery uses large quantity of flour in its manufacturing process. Annual consumption of flour by Sumatra is estimated to be 3 million kilograms. Orders must be placed in multiples of 1 thousand kilograms. The cost of carrying the inventory is Tk. 10 per kilogram. Sumatra's supplier for flour, Messrs Tara Flour Mill, sells the inventory to Sumatra at Tk.45 per kilogram. The cost of ordering the inventory is Tk. 75 per order. On an average it takes Tara 3 days to deliver from the day it receives order from Sumatra. However, there have been occasional delays in receiving delivery by a few days. Therefore, Sumatra maintains a safety stock covering a 2 day's period of safety. a. How much inventory of flour does Sumatra have to order to minimise on its total inventory cost? b. How many orders does Sumatra have to make with Tara Flour per year? c. Does Sumatra have any goods in transit? If so, how much? d. At what level of stock in hand, should Sumatra place a new order? e. What are Sumatra's average, maximum, and minimum values of inventory? Problem 2 (10 points) Ratna Garments is thinking of changing its credit policy from net 30 to 2/15, net 40 . Under current terms, Ratna's sales are Tk. 28 million per year, collection costs are Tk. 160 thousand, and bad debt losses are 2 percent of gross sales. Its average collection period under current policy is 28 days. If Ratna implements the proposed policy, annual sales are estimated to increase by 20 percent. Because of the discount facility, bad debt losses are expected to fall to 1 percent of gross sales. Collection costs, however, are expected to remain unaffected by the proposed policy. Ratna also estimates that 55 percent of customers (by taka value) that pay, will take the discount. The other paying customers will pay on the last day. Ratna's variable cost ratio is 85 percent while its opportunity cost of carrying receivables is 12 percent. Should Ratna Garments adopt the proposed change? Justify your decision with necessary calculations