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 ($)
How to Calculate Ordering Cost?
The following example problems outline how to calculate Ordering Cost.
Example Problem #1
- First, determine the annual demand. The annual demand is given as 500 .
- Next, determine the cost per order ($). The cost per order ($) is calculated as 20 .
- Next, determine the carrying cost per unit ($). The carrying cost per unit ($) is found to be 4.
- Finally, calculate the Ordering Cost using the formula above:
OC = SQRT ( (2* AD*CPO)/CC)
Inserting the values from above yields:
OC = SQRT ( (2* 500*20)/4) = 70.71 ($)
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 ($)
