Problem 20-36 (Algo)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 3,910mufflersOrdering cost$75per orderStandard deviation of daily demand 6mufflers per working dayService probability 87%Item cost$27.00per mufflerLead time 2working daysAnnual holding cost 36% of item valueWorking days 230per yearReview period 18working days a. What is the optimal target level (order-up-to level)? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)Optimal target level_________________ b. If the service probability requirement is 90 percent, the optimal target level will: multiple choiceIncreaseDecreaseStay the same

The amount of goods that is readily available throughout your distribution network is referred to as…

Answered: Palin’s Muffler Shop has one standard…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Problem 20-36 (Algo)

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		3,910	mufflers	Ordering cost	$	75	per order
Standard deviation of daily demand		6	mufflers per working day	Service probability		87	%
Item cost	$	27.00	per muffler	Lead time		2	working days
Annual holding cost		36	% of item value	Working days		230	per year
Review period		18	working days

a. What is the optimal target level (order-up-to level)? (Use Excel's NORMSINV() function to find the correct critical value for the given α-level. Do not round intermediate calculations. Round "z" value to 2 decimal places and final answer to the nearest whole number.)

Optimal target level_________________

b. If the service probability requirement is 90 percent, the optimal target level will:

multiple choice