Economic order quantity calculator
Calculate EOQ from annual demand, order cost and holding cost. See the formula, orders per year, and annual ordering and holding costs with a worked example.
Estimate an order size from annual demand, the cost of placing an order and the cost of holding one unit for a year. This free economic order quantity calculator shows the EOQ formula, orders per year and the corresponding annual ordering and holding costs. It is a planning model using your inputs.
How to use the EOQ calculator
- Enter annual demand in units for one product. Use one consistent unit, such as individual bottles or whole cases.
- Enter the fixed cost of placing one order. This represents costs associated with making an order, rather than the purchase price of all its goods.
- Enter the annual holding cost for one unit, as a money amount. For example, a $20 unit with an estimated 15% annual carrying rate would have a $3 holding cost.
- Select Calculate. All three inputs must be greater than zero. Use example loads the values in the table below.
Demand and holding cost both use a full year. Convert a monthly holding cost to an annual amount before entering it. Use the same currency for ordering and holding costs; the tool performs no currency conversion.
EOQ formula and assumptions
EOQ = √(2 × annual demand × cost per order ÷ annual holding cost per unit)
For an order quantity Q, the model estimates annual ordering cost as demand ÷ Q × order cost, and annual holding cost as Q ÷ 2 × unit holding cost. It balances ordering more often against holding a larger average batch. Virginia Tech's inventory management guide explains this tradeoff and the basic model's assumptions, including stable demand and replenishment conditions.
Worked example: an order of 400 units
| Input | Value |
|---|---|
| Annual demand | 9,600 units |
| Cost per order | $25 |
| Holding cost per unit per year | $3 |
The formula gives √(2 × 9,600 × 25 ÷ 3) = √160,000, an economic order quantity of 400 units.
At that quantity, 9,600 ÷ 400 = 24 orders per year. Ordering cost is 24 × $25 = $600 a year. Average cycle stock is 400 ÷ 2 = 200 units, with holding cost of 200 × $3 = $600 a year. The combined modeled ordering and holding cost is $1,200 a year.
This $1,200 excludes the cost of buying the units themselves. It also excludes any extra stock buffer you choose to hold.
Turn the estimate into an order decision
The mathematical answer can be fractional. The calculator keeps the unrounded EOQ for its derived figures, even when a displayed value is rounded. Before ordering, compare feasible whole-unit or pack quantities with supplier minimums, available space, shelf life and available cash. Quantity discounts or changing demand need a broader comparison than this basic model provides.
Use the reorder point calculator for a stock-level trigger and the safety stock calculator for a separate buffer estimate. When you have chosen an actual order, prepare its document with the purchase order generator.
Frequently asked questions
Does EOQ tell me when to order?
No. It estimates how much to order under the model's assumptions. A reorder point addresses the stock level at which to place an order.
Can holding cost be entered as a percentage?
Enter a money amount per unit per year. First multiply the unit cost by the annual holding percentage divided by 100. Entering 15 when you mean 15% would instead tell this calculator the holding cost is $15 per unit per year.
Why are zero inputs rejected?
With no demand or no ordering cost, this model does not produce a useful positive batch size. A zero holding cost also makes its division undefined. Review the inputs or use a different planning approach for that situation.
Does the calculator place an order?
No. It only calculates from the figures you enter. Copy the result before leaving the page if you need a record of the scenario.
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