EOQ Calculator (Economic Order Quantity)

Example scenario

With 12,000 units annual demand, $75 order cost, and $4 holding cost per unit: EOQ = √(2 × 12,000 × 75 ÷ 4) ≈ 671 units, about 18 orders per year, with roughly equal ordering and holding costs of ~$1,340 each.

Sample inputs

Annual demand (units): 12000
Cost per order ($): 75
Holding cost per unit per year ($): 4

Sample results

Economic order quantity (units): See calculator result
Orders per year: See calculator result
Annual ordering cost ($): See calculator result

Common mistakes

Misunderstanding: How do I calculate holding cost per unit — Holding cost = Unit cost × Carrying cost rate (typically 20–30% of unit cost annually).
Misunderstanding: What assumptions does EOQ require — Constant, known demand; fixed order cost per order; fixed holding cost per unit; instant replenishment; no quantity discounts.
Using default inputs without adjusting them to match your eoq calculator (economic order quantity) scenario.
Treating this estimate as a final number without checking business assumptions that apply to your situation.

Decision guide

The economic order quantity (EOQ) model determines how many units to order each time to minimize the combined cost of placing orders and holding inventory. Use the result as a planning checkpoint — not a substitute for professional advice where rules are complex.

Trust the projection more when

Enter annual demand in units for the SKU or product line
Input the fixed cost per purchase order (processing, shipping, receiving)
Enter the annual holding cost per unit (storage, insurance, obsolescence, capital cost)

Revisit inputs when

Review the EOQ, orders per year, and the balanced ordering vs. holding cost split
Round the EOQ to practical order quantities and compare to supplier minimums
Your jurisdiction, tax status, or contract terms differ from the example.

The economic order quantity (EOQ) model determines how many units to order each time to minimize the combined cost of placing orders and holding inventory. Developed by F.W. Harris in 1913, EOQ remains a foundational inventory management tool for retailers, distributors, and manufacturers with steady, predictable demand.

How to use this calculator

Enter annual demand in units for the SKU or product line.
Input the fixed cost per purchase order (processing, shipping, receiving).
Enter the annual holding cost per unit (storage, insurance, obsolescence, capital cost).
Review the EOQ, orders per year, and the balanced ordering vs. holding cost split.
Round the EOQ to practical order quantities and compare to supplier minimums.

Formula

EOQ = √(2 × Annual demand × Order cost ÷ Holding cost per unit). At EOQ, annual ordering cost equals annual holding cost. Orders per year = Annual demand ÷ EOQ. Total ordering cost = Orders per year × Order cost. Total holding cost = (EOQ ÷ 2) × Holding cost per unit.

Example

Frequently asked questions

How do I calculate holding cost per unit?

Holding cost = Unit cost × Carrying cost rate (typically 20–30% of unit cost annually). Include warehousing, insurance, shrinkage, and the opportunity cost of capital tied up in inventory.

What assumptions does EOQ require?

Constant, known demand; fixed order cost per order; fixed holding cost per unit; instant replenishment; no quantity discounts. Violating these assumptions reduces EOQ accuracy.

Should I always order exactly the EOQ?

Round to case packs, pallet quantities, or supplier minimums. Total cost is relatively flat near EOQ — ordering 600 vs. 671 units has minimal cost impact.

How does EOQ relate to safety stock?

EOQ sets order size; safety stock buffers against demand and lead time variability. Use both calculators together for a complete inventory policy.

EOQ Calculator (Economic Order Quantity)