Free tool
EOQ calculator
Estimate the order size that balances the cost of placing orders with the cost of holding stock.
Your annual demand and costs
The 25% carrying rate is an illustrative input, not an industry benchmark. Use your own annual holding costs.
Economic order quantity
493 units
- Orders per year
- 14.8
- Days between orders
- 24.66
- Annual ordering cost
- $739.93
- Annual holding cost
- $739.93
- Total annual cost
- $1,479.86
At the unrounded EOQ, annual ordering and holding costs are equal. The displayed whole-unit quantity is for planning.
The formula
Annual holding cost per unit (H) = unit cost × annual carrying rate
EOQ = square root of (2 × annual demand × order cost ÷ H)
Total annual cost = (annual demand ÷ order quantity) × order cost + (order quantity ÷ 2) × H
- Annual demand
- Units needed over one year.
- Order cost
- The cost of placing and receiving one order.
- H
- Annual carrying cost for one unit.
- Supplier minimum
- The smallest quantity a supplier will accept; optional.
Worked example
- Annual holding cost per unit is $12 × 25% = $3.
- EOQ is the square root of (2 × 7,300 × $50 ÷ $3) = 493 units when rounded.
- That is 14.8 orders a year, about one every 24.66 days.
- Annual ordering cost is $739.93 and holding cost is $739.93, totaling $1,479.86.
When it applies
- Items with steady demand and a repeatable cost of ordering and holding stock.
When it breaks down
- Price breaks, minimum order quantities, seasonal demand, perishability and cash constraints change the best order size.
Common mistakes
Using monthly demand
The formula uses annual demand and annual holding cost. Convert both to the same period.
Counting freight alone as order cost
Include the work of placing and receiving an order, not only freight.
Treating EOQ as safety stock
EOQ sizes a replenishment order. It does not include a stockout buffer.
Questions
What is the EOQ formula?
The square root of two times annual demand times cost per order, divided by annual holding cost per unit.
What is the difference between EOQ and MOQ?
EOQ is a calculated cost-minimizing order size. MOQ is a minimum imposed by a supplier.
Does EOQ include safety stock?
No. Size the buffer separately from the replenishment lot.
Is EOQ annual?
This formula uses annual demand and annual holding costs, then returns units per order.
Is EOQ always rounded up?
The mathematical result need not be whole. Round to a feasible pack size and compare its actual cost with the optimum.
Related
Published by Skuvelo. Results are estimates computed from the figures you enter, not a reading of your own sales or stock.
A calculator answers once. Skuvelo keeps answering.
This tool computes one number from what you type. Skuvelo computes it continuously, for every SKU, from your own sales and stock.