1. Llenroc Automotive produces power steering units in production lots. These units go into Jaguars 4.2 liter engine models and have a demand rate estimated to be 20,000 units per year. Llenroc makes a variety of power steering units in addition to the one used in this model of Jaguars. Switching from producing one power steering model type to another incurs a cost of $400. The cost of carrying a power steering unit in stock for a year is estimated to be $35.

1. While the goal is to minimize the average annual cost of changeovers and carrying inventory, management has decided that no more than 10 setups per year are permissible for the pump in question. Determine the optimal lot size given the constraint on production.
2. What is the solution if up to 20 setups were possible?