Economic Order Quantity Calculator

Balance ordering cost against holding cost

Economic order quantity is the classic US inventory lot-size that minimizes the sum of fixed order costs and annual holding cost when demand is steady. The formula returns a continuous optimum; real orders usually require whole units, packs, pallets, or supplier minimums, so compare nearby feasible quantities after rounding. Inventory turnover reports how often stock turns from COGS. This page does not load quantity discounts, safety stock, or a reorder-point table.

EOQ = √(2 × annual demand × cost per order ÷ holding cost per unit-year)
Orders per year = demand ÷ EOQ
Days between orders = 365 ÷ orders per year
Relevant cost = orders × cost per order + (EOQ ÷ 2) × holding cost

Example

Demand of 3,600 units, $100 per order, and $8 of holding cost per unit per year gives an EOQ of 300 units, 12 orders a year, and about 30.42 days between orders. Ordering cost and holding cost each equal $1,200, so the relevant annual cost is $2,400. Demand of 1,000, $10 per order, and $0.50 holding cost gives EOQ 200.

What the square root leaves out

Demand, order cost, and holding cost must be positive. Purchase price is assumed independent of order size. Lead time, stockouts, quantity breaks, pack sizes, supplier minimums, and a 52-week calendar stay outside this 365-day Wilson identity.

Frequently asked questions

Should I round EOQ?

The formula returns a continuous optimum. Round to feasible whole units or case quantities, then compare ordering plus holding cost for the nearby options.

Is holding cost a percent of price?

Enter dollars of holding cost per unit per year. If you only have a carrying-rate percent, multiply that rate by unit cost first.

Why 365 days?

Days between orders use a 365-day year, the same day-count as the XIRR page.

Does this include purchase cost?

No. Unit purchase cost cancels when price does not change with quantity. Only ordering plus holding is minimized.