EOQ Calculator
Optimal inventory order size.
Calculate Economic Order Quantity (EOQ) from annual demand, order cost, and holding cost. Enter demand units to see eoq from annual demand and order cost.
What this tool does
Economic order quantity (EOQ) is the order size that minimises combined ordering and holding costs. This calculator takes your annual demand in units, the cost of placing each order, and the holding cost per unit per year, then applies the classic Wilson formula to estimate the optimal quantity to order at each cycle. The result shows the number of units to order per batch. Annual demand and holding cost per unit typically drive the outcome most significantly—higher demand pushes the optimal order size up, while higher holding costs push it down. For example, a retailer managing seasonal inventory might use this to balance frequent small orders against the expense of storing excess stock. The calculation assumes consistent demand throughout the year and stable costs. It does not account for bulk discounts, supplier constraints, or demand variability. Results are for illustration and planning purposes.
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Economic Order Quantity (EOQ) solves the classic inventory optimization problem: order too much and holding costs pile up; order too little and you pay order costs repeatedly. EOQ finds the order size that minimizes total annual cost. Formula: √(2 × demand × order cost ÷ holding cost per unit).
12,000 annual demand × 40 order cost × 2 holding cost per unit. EOQ = √((2 × 12,000 × 40) ÷ 2) = √480,000 = 693 units per order. 17.3 orders/year at 693 units each. Total cost at EOQ: 1,386. Any other order size costs more. EOQ is mathematically optimal assuming demand stays steady.
EOQ assumes smooth demand and no quantity discounts - real life rarely works this way. Most businesses modify EOQ for: quantity discounts (slightly bigger orders if supplier offers price breaks), safety stock (buffer for demand spikes), seasonal variation (adjust order quantity by season). Use EOQ as starting point, adjust for reality.
Run it with sensible defaults
Using annual demand of 12,000, order cost of 40, holding cost per unit annual of 2, the calculation works out to 693 units. The defaults are meant as a starting point, not a recommendation.
The levers in this calculation
The inputs — Annual Demand (units), Order Cost, and Holding Cost per Unit Annual — do not pull with equal force. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
How the math works
EOQ = √(2 × demand × order cost ÷ holding cost). Orders/year = demand ÷ EOQ. Total cost = (orders × order cost) + (EOQ/2 × holding cost).
Using this as a check-in
Re-run this every three months. A single reading tells you where you stand; four readings tell you whether things are improving. The trend matters more than any individual snapshot.
What this doesn't capture
The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.
EOQ = √(2 × 12,000 × ££40 ÷ ££2) = 693 units.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
This calculator applies the Economic Order Quantity model, a standard inventory optimization method. It computes the optimal order size by taking the square root of twice the annual demand multiplied by the per-order cost, then dividing by the annual holding cost per unit. Using this EOQ value, the calculator determines the number of orders needed annually by dividing total demand by the order quantity. Total inventory cost is then calculated as the sum of ordering costs (number of orders multiplied by cost per order) and holding costs (average inventory level multiplied by cost per unit). The model assumes constant demand throughout the year, fixed costs per order and per unit held, and instantaneous replenishment. It does not account for quantity discounts, demand variability, lead times, stockouts, or storage constraints.
References
Frequently Asked Questions
What's the typical EOQ vs practical order?
How to estimate holding cost?
What's the order cost?
Does EOQ work for services?
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