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 (\$)