Calculate economic order quantity or solve for demand, order cost, or holding cost using annual units, ordering cost, and carrying cost.
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EOQ Formula
The economic order quantity, or EOQ, is the order size that balances ordering cost and inventory holding cost under the standard EOQ model.
If you leave a different field blank, the same EOQ relationship is rearranged to solve for that missing value.
- EOQ = economic order quantity, or the recommended order size
- D = annual demand in units
- S = order cost per order, in dollars
- H = holding cost per unit per year, in dollars
The calculator lets you enter any 3 of the 4 values and solves for the missing one. Demand and EOQ can be entered in units, thousands, or millions. Order cost and holding cost are entered as dollar amounts. When EOQ is the missing value, the calculator uses the square root formula. When demand, order cost, or holding cost is missing, it uses the rearranged formula for that variable.
Common EOQ Inputs and What They Mean
| Input | Typical meaning | Example |
|---|---|---|
| Demand per year | Total units expected to be sold or used in one year | 24,000 units per year |
| Order cost | Fixed cost to place one order, not the unit purchase price | $75 per order |
| Holding cost | Cost to hold one unit in inventory for one year | $3 per unit per year |
| EOQ | Suggested number of units to order each time | 1,095 units per order |
EOQ Result Interpretation
| Result pattern | What it usually indicates |
|---|---|
| Higher annual demand | EOQ increases because more inventory is needed over the year. |
| Higher order cost | EOQ increases because fewer, larger orders reduce ordering frequency. |
| Higher holding cost | EOQ decreases because smaller orders reduce the amount held in inventory. |
Example
Example 1: Calculate EOQ
Suppose annual demand is 10,000 units, order cost is $50 per order, and holding cost is $2 per unit per year.
The EOQ is about 707.11 units per order.
Example 2: Calculate Holding Cost
Suppose demand is 12,000 units per year, order cost is $40, and EOQ is 800 units.
The holding cost is $1.50 per unit per year.
FAQ
What is EOQ used for?
EOQ is used to estimate the most cost-efficient order quantity for inventory. It balances two costs: the cost of placing orders and the cost of holding inventory. The result tells you how many units to order at one time under the assumptions of the EOQ model.
Does order cost mean the cost of buying one unit?
No. Order cost is the fixed cost of placing one order. It can include purchase order processing, receiving, setup, administrative time, or shipping charges that apply per order. The unit purchase price is not part of the basic EOQ formula unless you are using a more advanced quantity discount model.
Why does the calculator require exactly 3 values?
The EOQ relationship has 4 variables: demand, order cost, holding cost, and EOQ. If you provide exactly 3, the missing value can be solved directly. If more than one value is missing, there is not enough information. If all 4 are entered, there is no single missing value to calculate.
