Economic Order Quantity (EOQ) Calculator
Find the order size that minimises total inventory cost — EOQ, orders per year and the ordering cycle from demand, order cost and holding cost.
How it works
EOQ = √(2 × annual demand × order cost ÷ holding cost per unit) · At the EOQ, annual ordering cost equals annual holding cost
The EOQ is the order size that minimises the combined cost of placing orders and holding inventory. Order in large batches and you place fewer orders but carry more stock; order in small batches and holding cost drops but ordering cost climbs. The square-root formula finds the sweet spot, where the two costs are exactly equal.
Worked example
With annual demand of 12,000 units, a $50 cost per order and $3 to hold a unit for a year, EOQ = √(2 × 12,000 × 50 ÷ 3) = √400,000 ≈ 632 units. That is about 19 orders a year, and total inventory cost of roughly $1,897.
Sources: Economic order quantity — Wikipedia
Frequently asked questions
What assumptions does EOQ make?
The classic model assumes steady, known demand, a constant unit price, a fixed cost per order and a constant holding cost, with instant replenishment. Real demand varies, so EOQ is a strong starting point that you pair with a safety stock and reorder point.
Why does ordering cost equal holding cost at the EOQ?
That equality is what the formula minimises. Below the EOQ, ordering cost dominates; above it, holding cost dominates. The total-cost curve is flattest at the point where they cross, which is the EOQ.
Should I round the EOQ?
Yes — round to a practical order size, case pack or supplier minimum. The total-cost curve is fairly flat near the optimum, so a modest rounding barely changes total cost.
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Educational estimate, not financial advice.