Palin’s Muffler Shop has one standard muffler that fits a large variety of cars. The shop wishes to establish a periodic review system to manage inventory of this standard muffler. Use the information in the following table to determine the optimal inventory target level (or order-up-to level):

Annual demand 3,000 mufflers Ordering cost

$50 per order Standard deviation of daily demand 6 mufflers working day Item cost $30 per muffler Lead time 2 working days Annual holding cost 25% of item value Working days 300 per year Review period 15 working days

a. What is the optimal target level (order-up-to level)?

b. If the service probability requirement is 95 percent, the optimal target level [your answer in part (a)] will (select one):
I. Increase.
II. Decrease.
III. Stay the same.1002W