Calculate optimal order quantity to minimize total inventory costs with holding costs, ordering costs, and demand rate inputs.
Enter demand, the fixed cost of placing an order, and the cost of holding one unit for the same time period. The Economic Order Quantity Calculator estimates the replenishment quantity that minimizes the combined ordering and cycle-stock holding costs under the standard EOQ assumptions. A frequent error is supplying a holding-cost percentage directly. It must first be converted to a currency amount per unit per period, such as dollars per unit per year.
A concrete input and expected output from the current implementation.
Input
Annual demand: 800 units Ordering cost: $25 per order Holding cost: $4 per unit per year
Expected output
Economic order quantity: 100 units
EOQ = sqrt((2 x 800 x 25) / 4) = sqrt(10000) = 100. This produces 8 orders per year, with $200 in annual ordering cost and $200 in annual cycle-stock holding cost.
The calculation is Q = sqrt((2 x D x S) / H), where D is demand per period, S is the fixed cost of placing one order, and H is holding cost per unit for that same period. Because the inputs appear under a square root, doubling demand or ordering cost does not double the suggested order quantity.
For an order quantity Q, expected orders per period are D / Q and average cycle stock is Q / 2. Ordering cost is therefore (D / Q) x S, while holding cost is (Q / 2) x H. At the unrounded EOQ, these two cost components are equal, and their sum is minimized.
Not when the unit price stays constant at every order quantity. That purchase cost is the same in the basic comparison and does not change the EOQ. Price still matters if holding cost is expressed as a percentage of item value. If suppliers offer quantity discounts, compare the total cost at each feasible price tier separately.
Yes. EOQ is a continuous mathematical result, while actual orders may require whole units, cartons, pallets, or supplier minimums. Check the feasible quantities immediately below and above the result and compare their ordering and holding costs. The rounded value closest to EOQ is often suitable, but pack sizes or price breaks can change the choice.
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