The Pear Corporation has a weekly demand for its pTab tablet computer of 500 units. The pTab shares its production line with other Pear computer models. For that reason, they produce the pTab in batches with the current batch size set at 4 weeks worth of demand. Each time a changeover occurs (i.e. each time the production line setups to make pTabs), Pear incurs a cost of $2,000. The pTab sells for $600 and Pears cost of capital is 25%. Assume the production line runs for 50 weeks per year.

a) Calculate how much Pear currently spends in total for holding and setup costs (TAHC + TASC) with their current production batch size.

b) Compute the economic batch size (EOQ). If Pear were to switch to the EOQ, how much would they save in holding and setup costs per year?