Economic Order Quantity Calculator
The order size that keeps ordering and holding costs lowest, with orders a year, days between them, the annual cost and a reorder point.
Result
Economic order quantity: 798 unitsEstimate
Assumes steady demand and a fixed cost per order. The cost curve is flat near the EOQ, so a convenient nearby size costs little extra.
- Orders a year
- 15Estimate
- Days between orders
- 24.3Estimate
- Annual ordering and holding cost
- $2,555.00Estimate
- Of which ordering
- $1,277.50
- Of which holding
- $1,277.50
- Annual cost ordering 80% of the EOQ
- $2,618.87Estimate
- Annual cost ordering 125% of the EOQ
- $2,618.87Estimate
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Results are arithmetic estimates based on the assumptions you enter, not accounting, tax, investment or lending advice. Forecasts can be wrong and important decisions should be checked with a qualified adviser. Read the full disclaimer
How to use the Economic Order Quantity Calculator
- Enter how many units you use or sell in a year.
- Enter what one order costs to place and receive, whatever its size, and what it costs to hold one unit for a year.
- Optionally enter the lead time in days, and any safety stock, for the reorder point.
The formula
With annual demand D, cost per order S and holding cost per unit per year H:
EOQ = √(2 × D × S ÷ H)orders a year = D ÷ EOQannual cost = (D ÷ Q) × S + (Q ÷ 2) × Hreorder point = D ÷ 365 × lead time in days + safety stockLarge orders mean few orders but a lot of stock on hand; small orders mean little stock but many orders. Ordering cost falls as the order grows and holding cost rises. The EOQ is where the two are equal, and their total is lowest.
Reading the answer
With 12,000 units a year, 85 an order and 3.20 to hold a unit for a year, the EOQ is about 798 units: 15 orders a year, roughly every 24 days, for 2,554.99 a year of ordering and holding cost. The cost of the goods themselves is not included, because it does not change with the order size.
The reorder point
Place the next order when stock falls to the demand expected during the lead time, plus any safety stock. The page rounds this up to a whole unit.
With your numbers
- EOQ = √(2 × 12,000 × $85.00 ÷ $3.20) = 798.44 units
- Ordering $1,277.50 + holding $1,277.50 = $2,555.00 a year; the two are equal at the EOQ
- Reorder point = 12,000 ÷ 365 × 12 days + safety stock = 394.52 units
Quick reference
Assumes steady demand and a fixed cost per order. The cost curve is flat near the EOQ, so a convenient nearby size costs little extra.
| Example | Economic order quantity |
|---|---|
| 12,000 a year, 85 an order, 3.20 to hold | 798 |
| Holding cost 12.80 | 399 |
| 1,000 a year, 50 an order, 5 to hold | 141 |
| 52,000 a year, 200 an order, 1.50 to hold | 3,724 |
| With 100 units of safety stock | 798 |
| 500 a year, 20 an order, 8 to hold | 50 |
Common questions about the Economic Order Quantity Calculator
- What goes into the cost per order?
- Everything that is paid once per order rather than per unit: the time to raise and approve it, delivery charges that do not depend on quantity, receiving and inspecting the goods, and paying the invoice.
- What goes into the holding cost?
- What it costs to keep one unit in stock for a year: storage space, insurance, spoilage, theft and obsolescence, and the return you give up by having cash tied up in stock. It is often entered as a percentage of the unit cost; multiply to get the amount.
- How exact does the order size need to be?
- Not very. The cost curve is flat near its minimum. Ordering 80% or 125% of the EOQ costs only about 2.5% more a year. Rounding to a full pallet or a supplier's pack size is almost always fine.
- When does EOQ not apply?
- When demand is seasonal or unpredictable, when suppliers give discounts for larger orders, when stock expires quickly, or when running out is very costly. The formula ignores all of these, so treat its answer as a starting point.