Business
Economic Order Quantity Calculator
Calculate economic order quantity, orders per year, average cycle stock, and the annual ordering-plus-holding cost from annual demand, purchase-order cost, and annual holding cost per unit. Unit purchase cost is retained as a planning input but does not change classic EOQ when there are no quantity discounts.
Economic order quantity-
Orders per year-
Average cycle stock-
Annual ordering cost-
Annual cycle-stock holding cost-
Annual ordering plus holding cost-
Annual purchase spend-
Purchase, ordering, and holding cost-
Decision view
Annual ordering and holding cost curves
Annual ordering and holding cost curvesOrdering cost falls as order quantity rises, holding cost increases, and their combined curve reaches its minimum at the calculated EOQ.
Exact scenario comparisonCost per purchase order changes while all other entered assumptions remain constant.
| Cost per purchase order | Economic order quantity | Orders per year | Average cycle stock | Annual ordering cost | Annual cycle-stock holding cost | Annual ordering plus holding cost | Annual purchase spend | Purchase, ordering, and holding cost |
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How to use Economic Order Quantity Calculator
- Enter annual unit demand, the incremental administrative and logistics cost of one order, and annual holding cost per unit.
- Review EOQ, orders per year, average cycle stock, and relevant ordering-plus-holding cost as one internally consistent benchmark.
- Compare the result with supplier pack sizes, minimums, discounts, capacity, shelf life, lead-time variation, service targets, and available cash.
Calculator guide
Understanding Economic Order Quantity Calculator
Economic order quantity balances two opposing modeled costs: placing more small orders increases ordering cost, while placing fewer large orders increases average cycle-stock holding cost. The classic square-root result is a benchmark for stable replenishment systems, not an automatic purchase recommendation.
Calculation method
How the calculation works
Use the classic EOQ square-root model to balance annual ordering cost with annual cycle-stock holding cost, while keeping unit purchase spend separate and reconciling it into the annual total. Use the classic EOQ square-root model to balance annual ordering cost with annual cycle-stock holding cost, while keeping unit purchase spend separate and reconciling it into the annual total.
Model fit
When classic EOQ needs another model
Use EOQ as a benchmark only when its operating assumptions resemble the replenishment system.
A practical order policy combines quantity, reorder timing, safety stock, supplier rules, and exception handling.
Worked situations
Practical examples
- Annual demand of 24,000 units, $85 per order, and $6 annual holding cost per unit produce an EOQ of about 824 units.
- That quantity implies roughly 29.1 orders per year and average cycle stock of about 412 units before safety stock.
- Purchase cost per unit does not enter the basic EOQ square root unless it changes holding cost or quantity-discount economics.
Better inputs
Useful tips
- Include only costs that change when an order is placed, such as setup, receiving, freight administration, and inspection where applicable.
- Build annual holding cost from capital, storage, insurance, shrinkage, obsolescence, and handling on a consistent per-unit basis.
- Round to feasible case packs or production lots only after evaluating the cost difference from the mathematical EOQ.
Before relying on the result
Limitations and common mistakes
- The classic model assumes steady known demand, constant lead time, instantaneous replenishment, no shortages, and no quantity discounts.
- Safety stock, reorder point, capacity, perishability, seasonality, uncertain supply, working-capital constraints, and multiple-item interactions are excluded.
- The simple beginning assumptions can be inappropriate for intermittent, project-based, highly perishable, or rapidly changing demand.
Reference
Key terms
- Ordering cost
- Incremental cost incurred each time a replenishment order or production setup is initiated.
- Holding cost
- Annual cost of carrying one unit in average cycle stock.
- Cycle stock
- Inventory that rises and falls through the normal replenishment cycle, excluding safety stock.
- EOQ
- Order quantity that balances modeled annual ordering and cycle-stock holding costs.
Important note
Calculated from the entered values using the displayed accounting method. Reconcile material decisions with source records and applicable accounting policy.
Frequently asked questions
Why does unit purchase cost not change EOQ here?
With a constant unit price, annual purchase cost is the same for every feasible quantity. It matters when it changes holding cost or when discounts apply.
Should EOQ be rounded?
Yes, to a feasible lot or pack size after comparing the nearby total relevant costs and operational constraints.
Does EOQ tell when to reorder?
No. Reorder timing requires lead-time demand and usually safety stock; EOQ addresses how much to order.
Can EOQ be used for production batches?
Only if the replenishment assumptions fit. Gradual production replenishment often calls for an economic production quantity model instead.