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 ($) 

To calculate the ordering cost, multiply 2 times the annual demand and cost per order, divide this result by the carrying cost per unit, then take the square root of the result.

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 ($)