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 (\$)