📦 EOQ Calculator
Calculate Economic Order Quantity (EOQ)
Cost to place and receive an order
Cost to hold one unit in inventory for one year
How to Use This Calculator
Enter Annual Demand
Input the annual demand for the item - the total number of units needed per year.
Enter Ordering Cost
Enter the ordering cost per order - the cost to place and receive an order (e.g., administrative costs, shipping, setup).
Enter Holding Cost
Enter the holding cost per unit per year - the cost to hold one unit in inventory for one year (e.g., storage, insurance, opportunity cost).
Review EOQ
See the economic order quantity (EOQ) - the optimal order quantity that minimizes total inventory costs. Also see number of orders, time between orders, and total costs.
Formula
EOQ = √(2 × Annual Demand × Ordering Cost / Holding Cost)
Total Cost = Annual Ordering Cost + Annual Holding Cost
Example Calculation:
If annual demand 10,000 units, ordering cost $50, holding cost $2 per unit:
• EOQ = √(2 × 10,000 × $50 / $2) = √500,000 = 707 units
• Number of orders = 10,000 / 707 = 14.1 orders/year
• This minimizes total inventory costs
About EOQ Calculator
An EOQ (Economic Order Quantity) calculator helps you calculate the optimal order quantity that minimizes total inventory costs. EOQ is calculated using the formula: √(2 × Annual Demand × Ordering Cost / Holding Cost). The EOQ model balances ordering costs (costs to place orders) and holding costs (costs to hold inventory) to find the optimal order quantity. Using EOQ helps reduce inventory costs, optimize inventory levels, and improve inventory management efficiency.
When to Use This Calculator
- Inventory Management: Optimize order quantities
- Cost Optimization: Minimize total inventory costs
- Inventory Planning: Plan optimal order quantities
- Supply Chain Management: Optimize inventory levels
Understanding EOQ
- Optimal Quantity: Order quantity that minimizes total costs
- Cost Balance: Balances ordering costs and holding costs
- Assumptions: Assumes constant demand and costs
- Limitations: May not account for all real-world factors
Why Use Our Calculator?
- ✅ Cost Optimization: Minimize total inventory costs
- ✅ Inventory Management: Optimize order quantities
- ✅ Inventory Planning: Plan optimal order quantities
- ✅ Supply Chain: Optimize inventory levels
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is EOQ (Economic Order Quantity)?
EOQ (Economic Order Quantity) is the optimal order quantity that minimizes total inventory costs. It's calculated using the formula: √(2 × Annual Demand × Ordering Cost / Holding Cost). The EOQ model balances ordering costs (costs to place orders) and holding costs (costs to hold inventory) to find the optimal order quantity. Using EOQ helps reduce inventory costs, optimize inventory levels, and improve inventory management efficiency.
What are the assumptions of the EOQ model?
The EOQ model assumes: (1) Constant demand - demand is constant and known, (2) Constant costs - ordering and holding costs are constant, (3) Instant replenishment - inventory is replenished instantly when ordered, (4) No shortages - no stockouts or shortages, (5) Single product - model applies to a single product. These assumptions may not hold in real-world situations, so EOQ should be used as a guide rather than an exact calculation.
How do I calculate ordering cost and holding cost?
Ordering cost includes: administrative costs, shipping costs, setup costs, and other costs associated with placing and receiving an order. Holding cost includes: storage costs, insurance, opportunity cost of capital, obsolescence, and other costs of holding inventory. Calculate holding cost as a percentage of inventory value or as a fixed cost per unit per year. Both costs should be calculated accurately for the EOQ calculation to be meaningful.
Why is EOQ important?
EOQ is important because it helps optimize inventory management and reduce costs. It helps: (1) Minimize costs - find the order quantity that minimizes total inventory costs, (2) Optimize inventory - optimize inventory levels, (3) Improve efficiency - improve inventory management efficiency, (4) Plan orders - plan optimal order quantities and timing. Using EOQ helps businesses reduce inventory costs and improve inventory management, though real-world factors may require adjustments.