EOQ Calculator
Calculate economic order quantity, expected orders per year and annual ordering plus holding cost from classic EOQ assumptions.
Calculate Economic Order Quantity (EOQ)
Estimate the order size that balances annual ordering and inventory holding costs under the classic EOQ model.
EOQ formula
The classic Economic Order Quantity model uses EOQ = √(2DS/H), where D is annual demand, S is ordering/setup cost per order and H is annual holding cost per unit. At the model optimum, the variable annual ordering and cycle-stock holding costs are balanced.
What EOQ assumes
Basic EOQ assumes relatively stable known demand, a fixed ordering cost, constant unit holding cost, replenishment without quantity constraints, and no stockouts within the cycle-stock model. Those assumptions can be unrealistic for seasonal, perishable, capacity-constrained or discount-driven inventory.
EOQ is not a reorder point
EOQ answers “how much to order” under the model. Reorder point answers “when to order” and must consider lead-time demand plus any safety stock. Do not use EOQ alone to set the trigger inventory level.
Use economic inputs, not convenient guesses
Ordering cost can include relevant procurement/setup/admin effort per order. Annual holding cost per unit can include capital, storage, insurance, obsolescence and shrinkage components appropriate to your organization. Purchase cost is excluded from the displayed ordering + holding total unless it changes with order size.
Run sensitivity before changing purchasing policy
EOQ changes with the square root of demand and cost assumptions, so modest input errors usually change the recommended quantity less dramatically than the raw inputs themselves. Still, test plausible ranges for order cost and holding cost before implementing a policy. Supplier minimums, case-pack quantities, shelf life, storage limits and cash constraints can require rounding or overriding the theoretical EOQ.