Free Economic Order Quantity Calculator
Calculate the Economic Order Quantity (EOQ) to find the optimal order quantity that minimizes total inventory costs including ordering and holding costs.
Economic Order Quantity
500
Economic Order Quantity vs Annual Demand (units)
How to Calculate Economic Order Quantity
Formula
EOQ = sqrt(2 x Annual Demand x Ordering Cost / Holding Cost Per Unit)
The EOQ model, developed by Ford W. Harris in 1913, finds the sweet spot between ordering too frequently (high ordering costs) and ordering too much at once (high holding costs). At the EOQ, total ordering costs equal total holding costs, producing the lowest combined inventory expense. While the model assumes constant demand and lead times, it provides an excellent starting point for inventory optimization.
Example Calculation
Annual demand is 10,000 units. Each order costs $50 to place, and holding one unit for a year costs $4.
- 01EOQ = sqrt(2 x 10,000 x $50 / $4) = sqrt(250,000) = 500 units
- 02Orders Per Year = 10,000 / 500 = 20 orders
- 03Total Annual Cost = sqrt(2 x 10,000 x $50 x $4) = $2,000
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