Answer:
The optimal production batch size for the supplier is 980 units.
Explanation:
In order to calcuate the optimal production batch size for the supplier we have to use the following formula:
optimal production batch size= [tex]\sqrt[/tex](2×Annual Demand×setup cost)
Holding Cost
optimal production batch size=[tex]\sqrt[/tex] (2×(1,000×12)×($250×4)
($100×25%)
optimal production batch size=[tex]\sqrt[/tex](2×12,000×$1,000)
$25
optimal production batch size= 980 units