How many units should you order at once? Buy too often and fees pile up. Buy too much and stock sits idle. The Economic Order Quantity Calculator answers that with the classic EOQ model. It balances the cost of placing orders against the cost of holding inventory.
Enter yearly demand, order cost, holding cost, and lead time. You get the best order size, the order rhythm, yearly costs, and a reorder point. It suits small retailers, warehouse managers, and anyone buying steady-demand goods.
Table of Contents
- What the Calculator Does
- How to Use It, Step by Step
- The EOQ Formula
- Worked Example
- How to Read the Results
- Putting EOQ to Work
- Limitations and Assumptions
- FAQs About the Economic Order Quantity Calculator
What the Calculator Does
The tool recalculates as you type. Six inputs feed eight results.
- Optimal Economic Order Quantity (EOQ): the order size, shown in whole units.
- Orders Per Year: yearly demand divided by the EOQ.
- Days Between Orders: working days per year divided by orders per year.
- Total Annual Holding Cost and Total Annual Ordering Cost.
- Total Inventory Management Cost: those two costs added together.
- Annual Purchase Cost: annual demand times unit purchase cost, shown for reference.
- Reorder Point (ROP): the stock level that should trigger a new order.
- Copy Summary and Reset buttons.
How to Use It, Step by Step
- Enter the units you sell in a year in Annual Demand (D) [Units].
- Enter the cost of placing one order in Fixed Order Cost (S) [Per Order]. Include shipping, handling, and paperwork.
- Enter the yearly cost of storing one unit in Annual Holding Cost (H) [Per Unit].
- Fill in Unit Purchase Cost (C) if you like. It only feeds the Annual Purchase Cost card, and a blank shows N/A there.
- Enter supplier delay in Lead Time (Days) and selling days in Working Days / Year.
- Read the EOQ first, then the cost cards and the reorder point. A red message means an input needs fixing.
The EOQ Formula
EOQ finds the order size where yearly ordering cost and yearly holding cost are about equal. Bigger orders mean fewer orders but more stock on the shelf.
2 × D × S÷H→Square Root=EOQ
- EOQ = √(2 × D × S ÷ H). The card shows it rounded to a whole unit.
- Orders per year = D ÷ EOQ, using the unrounded EOQ.
- Days between orders = working days ÷ orders per year.
- Holding cost = (EOQ ÷ 2) × H. Ordering cost = orders per year × S.
- Annual purchase cost = D × C. Reorder point = (D ÷ working days) × lead time, rounded.
Worked Example
Tomas runs an online shop selling 12,000 phone cases a year. Each order costs $75 to place, and holding one case costs $3 a year. The supplier takes 10 days, he sells 300 days a year, and each case costs $18.
| Result | Calculation | Output |
|---|
| EOQ | √(2 × 12,000 × 75 ÷ 3) = 774.6 | 775 Units |
| Orders Per Year | 12,000 ÷ 774.6 | 15.5 Orders |
| Days Between Orders | 300 ÷ 15.492 | 19.4 Days |
| Annual Holding Cost | (774.6 ÷ 2) × $3 | $1,161.90 |
| Annual Ordering Cost | 15.492 × $75 | $1,161.90 |
| Total Cost | $1,161.90 + $1,161.90 | $2,323.79 |
| Annual Purchase Cost | 12,000 × $18 | $216,000.00 |
| Reorder Point | (12,000 ÷ 300) × 10 | 400 Units |
Tomas should order about 775 cases every 19 days. When stock drops to 400, he places the next order. The $216,000 purchase cost does not change the EOQ.
How to Read the Results
EOQ is the order size with the lowest combined cost under the model. Ordering a bit more or less changes total cost only slightly.
The two cost cards come out equal. That is the sign the model balanced them. The tool uses the unrounded EOQ for costs, though the EOQ card shows whole units.
Annual Purchase Cost is demand times unit cost. It is a reference total, so it never changes the EOQ or the other cards.
Reorder Point is the units you sell during the supplier lead time. Place the order when stock reaches it, and the shipment arrives as you run out.
Putting EOQ to Work
Real demand is rarely flat. Add a buffer with the safety stock calculator so late shipments do not empty shelves. Then check what the extra stock costs with the inventory carrying cost calculator.
The unit price calculator helps compare supplier quotes before you pick one. To see how fast stock moves after a new order size, use the inventory turnover calculator. More tools are in the finance and business calculator hub.
A good holding cost estimate matters most. It often covers storage space, insurance, spoilage, and the return on cash tied up in goods. Small errors in H shift the answer, but only by the square root.
Limitations and Assumptions
- The model assumes steady demand, a fixed order cost, and a constant holding cost per unit.
- It ignores volume discounts, stockouts, and safety stock. The reorder point covers lead time demand only.
- Unit Purchase Cost does not enter the EOQ. It only drives the Annual Purchase Cost card.
- Blank or zero holding cost, blank working days, and blank demand show a message and N/A. Nothing is filled in silently.
- Lead time is in days, but demand is spread over working days. Keep both on one basis.
- Demand must be 1 or more, order cost above $0, and holding cost $0.01 or more.
- Lead time must be 0 to 3,650 days. Working days must be 1 to 365.
- When the EOQ rounds to under 1 unit, the card reads Less than 1 Unit.
FAQs About the Economic Order Quantity Calculator (EOQ)
What does economic order quantity mean?
It is the order size that gives the lowest total of ordering and holding costs. It is a standard idea in inventory and supply chain courses.
What counts as a holding cost?
Holding cost includes storage, insurance, shrinkage, handling, and the return you could earn on the cash. Enter it as dollars per unit per year.
Why are the holding and ordering costs equal?
At the EOQ, the model balances the two costs. The tool uses the unrounded EOQ, so both show $1,161.90 in the example.
Why does the unit purchase cost not change the EOQ?
In the basic EOQ model, the buying price does not affect the best order size. The tool uses it only for the Annual Purchase Cost card.
How do I use the reorder point?
Place a new order when on-hand stock falls to the reorder point. Add safety stock yourself if your supplier is sometimes late.
Should I always order exactly the EOQ?
Not always. Case packs, truck sizes, and supplier minimums may push you to a nearby quantity. Total cost stays fairly flat near the EOQ.
This calculator gives planning estimates only and is not financial advice. Reviewed for general accuracy by Prof. Dr. Khalil Mudassar, PhD.