About the EOQ Calculator
This EOQ calculator finds the economic order quantity — the number of units to order each time that minimizes the combined cost of placing orders and holding stock. Enter annual demand, the fixed cost of placing one order and the yearly cost of holding one unit (as a dollar amount or as a percentage of unit cost), and it returns the optimal order size, how many orders you will place a year, the days between orders and the total annual cost.
It is built for retailers, e-commerce sellers, restaurants and purchasing managers who reorder the same items regularly. Add your supplier lead time and it also calculates a reorder point — the stock level at which to place the next order so it arrives just as you run out.
The classic EOQ model assumes steady demand, a fixed cost per order, a constant holding cost and no quantity discounts. Real demand fluctuates, so most businesses add safety stock on top of the reorder point.
With the default inputs, the economic order quantity is 707 units. Change any value above to recalculate instantly.
How to use the eoq calculator
- 1Enter how many units you sell or use in a year.
- 2Enter the fixed cost of placing and receiving one order.
- 3Enter the holding cost as dollars per unit per year, or as a percentage of unit cost.
- 4Add supplier lead time in days to get a reorder point.
- 5Use the EOQ as your standard order size and check the cost curve.
Formula and method
Ordering more units at once means fewer orders (lower ordering cost) but more stock sitting on the shelf (higher holding cost). The total annual cost is the number of orders D/Q times the cost per order S, plus the average inventory Q/2 times the annual holding cost per unit H. EOQ is the order size where these two costs are equal and the total is at its minimum.
If holding cost is entered as a percentage, H = unit cost × holding rate. The reorder point uses average daily demand (annual demand ÷ 365) multiplied by supplier lead time in days. Purchase cost of the goods is excluded because it does not change with order size unless there are quantity discounts.
- D
- Annual demand in units
- S
- Fixed cost per order
- H
- Holding cost per unit per year
- Q
- Order quantity
Worked examples
12,000 units a year, $50 per order
EOQ = √(2 × 12,000 × 50 ÷ 2.40) = √500,000 ≈ 707 units. That means about 17 orders a year, every 21.5 days, with ordering and holding costs both about $848.53 for a total of $1,697.06. With a 7-day lead time, reorder at about 230 units.
Holding cost as 25% of a $40 item
Holding one unit costs 25% × $40 = $10 a year. EOQ = √(2 × 5,000 × 120 ÷ 10) ≈ 346 units, about 14.4 orders a year, and a minimum total cost of about $3,464. With 10 days of lead time, reorder at about 137 units.
Slow-moving part
EOQ = √(2 × 1,000 × 25 ÷ 0.80) = √62,500 = 250 units, so you order four times a year, roughly every 91 days, for a total ordering-plus-holding cost of $200.
Frequently asked questions
What is economic order quantity?+
EOQ is the order size that minimizes the total of ordering costs and inventory holding costs for an item with steady demand. It was developed by Ford W. Harris in 1913 and is still a standard inventory management formula.
What are holding costs?+
Holding (carrying) costs include warehouse space, insurance, taxes, spoilage, obsolescence, shrinkage and the cost of capital tied up in stock. They are commonly estimated at around 15% to 30% of an item’s value per year.
What are the limitations of the EOQ model?+
EOQ assumes constant demand, fixed ordering and holding costs, instant replenishment and no quantity discounts or stockouts. When suppliers offer volume discounts or demand is seasonal, compare total costs at several order sizes instead of relying on EOQ alone.
How is the reorder point different from EOQ?+
EOQ tells you how much to order; the reorder point tells you when to order. The reorder point equals average daily demand times lead time, and businesses typically add safety stock to cover demand spikes or late deliveries.
Why are ordering cost and holding cost equal at the EOQ?+
In the basic model the total cost curve is at its lowest where the falling ordering-cost curve crosses the rising holding-cost curve. At that point the two annual costs are exactly equal.