Economic Order Quantity (EOQ) Calculator
Calculate the order quantity that minimises total inventory cost by balancing ordering costs against holding costs, using the classic EOQ model.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Economic Order Quantity (EOQ) Calculator | — | EOQ = √(2DS / H) | units |
Step-by-Step Examples
Annual demand 12,000 units, order cost 120, holding cost 4.80 per unit per year.
- EOQ = √((2 × 12,000 × 120) / 4.80)
- = √(2,880,000 / 4.80) = √600,000
- EOQ = 774.6 ≈ 775 units
- Orders per year = 12,000 / 775 = 15.5
Annual demand 5,000, order cost 800, holding cost 6.00.
- EOQ = √((2 × 5,000 × 800) / 6.00)
- = √(8,000,000 / 6) = √1,333,333
- EOQ = 1,154.7 ≈ 1,155 units
- Expensive ordering pushes toward fewer, larger orders
Annual demand 20,000, order cost 90, holding cost 30.00.
- EOQ = √((2 × 20,000 × 90) / 30)
- = √(3,600,000 / 30) = √120,000
- EOQ = 346.4 ≈ 346 units
- Expensive holding pushes toward frequent small orders
Real-World Applications
Common Mistakes to Avoid
The model assumes constant, known demand. With seasonal or erratic demand, EOQ gives a rough guide at best and needs safety stock alongside it.
EOQ in its basic form assumes constant unit price. Where volume discounts apply, the discounted-EOQ variant should be used instead.
Holding cost should include storage, insurance, obsolescence, shrinkage, and the opportunity cost of capital — commonly 20 to 30% of unit value, not just warehouse rent.