Economic Order Quantity Calculator finds the order size that balances annual ordering and inventory holding costs. It also estimates order frequency, cycle stock, cost savings, and a practical purchase quantity adjusted for minimum orders and case packs.
Enter EOQ assumptions
Economic order quantity formula
EOQ is the economic order quantity in units, D is annual demand in units, S is the fixed cost to place one order, and H is annual holding cost per unit. When holding cost is entered as a percentage, H = C × i, where C is unit cost and i is the annual carrying-rate decimal.
For an order quantity Q, the basic model minimizes the sum of these two relevant costs. At the exact theoretical EOQ, annual ordering cost equals annual holding cost.
How to use the Economic Order Quantity Calculator
The classic formula can return a fractional quantity that a supplier will not accept. This Economic Order Quantity Calculator first finds the theoretical EOQ, then tests feasible quantities around it after applying your minimum order quantity and case-pack multiple. It recommends the feasible quantity with the lowest estimated annual ordering-plus-holding cost instead of blindly rounding upward.
The result answers how much to order. It does not decide when to order. Use the Reorder Point Calculator with lead-time demand and safety stock to determine the trigger level.
Worked EOQ example
Using the Economic Order Quantity Calculator, assume annual demand is 12,000 units, each purchase order costs $75, unit cost is $20, and the annual holding rate is 25%. Annual holding cost per unit is $20 × 25% = $5. The EOQ is √((2 × 12,000 × $75) ÷ $5), or 600 units. This produces 20 orders per year and average cycle inventory of 300 units. Ordering cost and holding cost are each $1,500, so the relevant annual inventory cost is $3,000.
| Example measure | Calculation | Result |
|---|---|---|
| Holding cost per unit | $20 × 25% | $5 per year |
| Economic order quantity | √((2 × 12,000 × $75) ÷ $5) | 600 units |
| Orders per year | 12,000 ÷ 600 | 20 |
| Ordering + holding cost | $1,500 + $1,500 | $3,000 per year |
What to include in ordering and holding costs
Ordering cost per order
The Economic Order Quantity Calculator is only as accurate as the costs entered. Include costs that are incurred because an order is placed: buyer and approval time, purchase-order processing, fixed inbound freight or booking charges, receiving setup, inspection setup, and invoice-processing effort. Do not enter the product purchase price as the ordering cost.
Holding cost per unit per year
Holding cost can include the cost of capital tied up in stock, warehouse space, handling, insurance, damage, shrinkage, expiry, and obsolescence. If your accounting system provides a carrying-rate percentage, multiply that rate by unit cost. Use the direct method when you already know an annual currency amount per unit.
EOQ assumptions and limitations
The Economic Order Quantity Calculator uses the standard EOQ model, which assumes steady known demand, constant ordering and holding costs, immediate replenishment, no shortages, and no quantity discounts. Real operations may have seasonality, uncertain lead times, limited storage, expiring stock, supplier capacity constraints, cash limits, or price breaks. Treat the output as a baseline and compare feasible supplier tiers before placing an order.
- Keep demand and holding cost on the same annual time basis.
- Calculate EOQ separately for products with different costs or demand patterns.
- Add safety stock to average inventory only when estimating total inventory value; safety stock does not change the basic EOQ formula.
- Review fast-moving, seasonal, or perishable products more frequently.
- Compare any quantity discount with the extra holding cost and obsolescence risk.
- Use an economic production quantity model when inventory is replenished gradually through internal production.
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Frequently asked questions
What is economic order quantity?
The Economic Order Quantity Calculator estimates the order size that minimizes the basic annual sum of fixed ordering costs and inventory holding costs under the model assumptions.
Does EOQ include safety stock?
No. The Economic Order Quantity Calculator determines the replenishment batch size. Safety stock is a separate buffer for uncertainty and can be added when estimating average total inventory or setting a reorder point.
Should EOQ be rounded up or down?
The Economic Order Quantity Calculator tests feasible quantities around the theoretical result, including supplier minimums and pack sizes, and chooses the one with the lower total relevant cost. This calculator performs that comparison.
How often should EOQ be recalculated?
For reliable Economic Order Quantity Calculator results, recalculate when demand, unit cost, order-processing cost, carrying rate, supplier terms, pack size, or storage conditions change materially.
Can EOQ handle quantity discounts?
The basic formula does not optimize price breaks. Compare total purchase, ordering, and holding costs at each eligible price tier before choosing a discounted quantity.