Final answer:
The EOQ for Bakery A with the initial demand is approximately 7.07 bags. When demand is doubled, the new EOQ is approximately 10 bags, resulting in a percentage change in EOQ of approximately 41.44%.
Step-by-step explanation:
The question relates to the Economic Order Quantity (EOQ) model in inventory management. Given that Bakery A uses 80 bags of chocolate chips each year at an ordering cost of $20 per order and an inventory holding cost of 40%, we calculate the EOQ using the formula:
EOQ = √((2DS)/H)
where D is the demand (number of units), S is the setup or ordering cost per order, and H is the holding cost per unit, per year.
For Bakery A's original demand of 80 bags:
EOQ = √((2*80*20)/(0.4*80))
EOQ = √((1600)/(32))
EOQ = √(50)
EOQ = 7.07 (approximately)
If Bakery A's demand for chocolate chips is doubled, the new EOQ can be calculated as follows:
EOQ_new = √((2*160*20)/(0.4*80))
EOQ_new = √((3200)/(32))EOQ_new = √(100)
EOQ_new = 10 (approximately)
The percentage change in EOQ can be calculated using the formula:
Percent Change = ((EOQ_new - EOQ_original) / EOQ_original) * 100%
Percent Change = ((10 - 7.07) / 7.07) * 100%
Percent Change = (2.93 / 7.07) * 100%
Percent Change = 41.44% (approximately)
The percentage change in Bakery A's EOQ after doubling its demand is approximately 41.44%.