The EOQ model balances two costs: ordering more often raises ordering costs, while ordering more each time raises storage costs. It assumes steady demand and instant delivery, so add safety stock in practice.
How to use the EOQ Calculator
- Annual demand (units)
- Cost per order
- Holding cost given as
- Holding cost per unit per year
- Unit cost
- Holding cost rate
- Working days per year
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter annual demand, the cost of placing an order and the yearly holding cost per unit (or as a percentage of unit cost).
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Annual demand (units) | A number |
| Cost per order | Amount in your currency |
| Holding cost given as | Choose one: Amount per unit per year, Percentage of unit cost |
| Holding cost per unit per year | Amount in your currency |
| Unit cost | Amount in your currency |
| Holding cost rate | In % |
| Working days per year | A number |
What each result means
- Economic order quantity = sqrt(2×[Annual demand (units)]×[Cost per order]÷[Holding cost per unit per year])
- Orders per year = [Annual demand (units)]÷[Economic order quantity]
- Days between orders = [Working days per year]÷[Orders per year]
- Annual ordering cost = [Orders per year]×[Cost per order]
- Annual holding cost = [Economic order quantity]÷2×[Holding cost per unit per year]
- Total annual inventory cost = [Annual ordering cost] + [Annual holding cost]
Example values
How the main result changes when Annual demand changes and everything else stays at the example values above:
| Annual demand (units) | Economic order quantity (units) |
|---|---|
| 6,000 | 620 |
| 9,000 | 759 |
| 12,000 | 876 |
| 15,000 | 980 |
| 18,000 | 1,073 |
| 24,000 | 1,239 |
Formula
EOQ = √(2 × annual demand × cost per order ÷ holding cost per unit per year)Orders per year = demand ÷ EOQTotal cost = (demand ÷ EOQ) × order cost + (EOQ ÷ 2) × holding costWorked example
Inputs — Annual demand (units): 12,000; Cost per order: $80; Holding cost given as: Amount per unit per year; Holding cost per unit per year: $2.5; Unit cost: $25; Holding cost rate: 20 %; Working days per year: 250.
Results — Economic order quantity = 876 units; Orders per year = 13.7; Days between orders = 18.3; Annual ordering cost = $1,095.45; Annual holding cost = $1,095.45; Total annual inventory cost = $2,190.89.
Frequently asked questions
What is EOQ?
The order quantity that minimises total ordering and holding costs.
What are the assumptions of EOQ?
Constant demand, fixed order costs, constant holding costs and no shortages.
At EOQ, how do ordering and holding costs compare?
They are equal.
What formula does the EOQ Calculator use?
EOQ = √(2 × annual demand × cost per order ÷ holding cost per unit per year).