EOQ Calculator: Economic Order Quantity
Enter annual demand, the cost of placing one order and the cost of holding one unit for a year to get the order size that keeps total inventory cost lowest.
Economic order quantity
849units
848.53
Orders a year
14.1
Days between orders
26
Ordering cost a year
1,060.66
Holding cost a year
1,060.66
Total cost a year
2,121.32
EOQ = √(2 × annual demand × cost per order ÷ holding cost per unit a year)
At the EOQ the yearly ordering cost and holding cost are equal, and their total is the lowest.
The EOQ formula
The economic order quantity (EOQ) is the order size that makes the total cost of ordering and holding stock as low as possible. Order too often and you pay for many purchase orders, deliveries and receiving; order too much at once and you pay to store, insure and finance the stock. EOQ is the balance point.
The EOQ formula
EOQ = √(2 × D × S ÷ H), where D is the yearly demand in units, S is the cost of placing one order and H is the cost of holding one unit for a year.
Example: a shop sells 12,000 units a year, each order costs 75 to place and receive, and holding one unit costs 2.50 a year. EOQ = √(2 × 12,000 × 75 ÷ 2.5) = √720,000 ≈ 849 units, about 14 orders a year, one every 26 days.
What goes into each cost
| Cost | Includes |
|---|---|
| Ordering cost (S) | Purchasing staff time, freight booking, receiving and inspection, paying the invoice |
| Holding cost (H) | Warehouse space, insurance, the money tied up in stock, shrinkage and obsolescence; often 15 to 30% of the unit cost a year |
Where EOQ needs care
EOQ assumes steady demand, a fixed price and instant delivery. Round it to the supplier's case or pallet size, check minimum order quantities and quantity discounts, and add a buffer with the safety stock calculator. The reorder point calculator tells you when to place each order.
Copy the result, or save it as a PDF to attach to an email or a report. Nothing you type leaves your browser.
Features
- Economic order quantity
- Holding cost as an amount or a % of unit cost
- Orders a year and days between orders
- Yearly ordering, holding and total cost
- Formula shown
- Copy or PDF
Frequently asked questions
What is a good holding cost to use?
Many businesses use 20 to 25% of the unit cost a year. Use your own figure if you know your storage, insurance and financing costs.
Why are ordering cost and holding cost equal at the EOQ?
That is where their total is lowest. Ordering more at once lowers ordering cost but raises holding cost by the same amount, and the other way round.
Does EOQ work with quantity discounts?
Not directly. Work out the total cost at the EOQ and at each discount break, including the cheaper price, and choose the lowest.
Is the calculator free?
Yes. No sign up. It runs in your browser, and you can copy the result or save it as a PDF.