Sarah’s Muffl er Shop has one standard muffl er that fi ts a large variety of cars. Sarah wishes to establish a reorder point system to manage inventory of this standard muffl er. Use the following information to determine the best order size and the reorder point:

Annual demand 3,500 muffl ers Ordering cost $50 per order Standard deviation of daily demand Item cost Annual holding cost 6 muffl ers per working day

$30 per muffl er 25% of item value Service probability Lead time Working days 90%

2 working days 300 per year