Enter the annual demand, the cost per order ($), and the carrying cost per unit ($) into the Ordering Cost Calculator. The calculator will evaluate and display the Ordering Cost. 

Ordering Cost Formula

The following formula is used to calculate the Ordering Cost. 

OC = SQRT ( (2* AD*CPO)/CC)

  • Where OC is the Ordering Cost ($)
  • AD is the annual demand 
  • CPO is the cost per order ($) 
  • CC is the carrying cost per unit ($) 

How to Calculate Ordering Cost?

The following example problems outline how to calculate Ordering Cost.

Example Problem #1

  1. First, determine the annual demand. The annual demand is given as 500 .
  2. Next, determine the cost per order ($). The cost per order ($) is calculated as  20 .
  3. Next, determine the carrying cost per unit ($). The carrying cost per unit ($) is found to be 4.
  4. Finally, calculate the Ordering Cost using the formula above: 

OC = SQRT ( (2* AD*CPO)/CC)

Inserting the values from above yields: 

OC = SQRT ( (2* 500*20)/4) = 70.71 ($)


Example Problem #2

The variables needed for this problem are provided below:

annual demand = 700

cost per order ($) = 30

carrying cost per unit ($) = 10

Entering these values and solving gives:

OC = SQRT ( (2* 700*30)/10) = 64.807 ($)