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The economic order quantity balances two costs. Ordering often in small batches keeps stock low but costs more in ordering (admin, delivery, setup); ordering rarely in big batches saves ordering cost but ties up money and space. EOQ is the quantity where the two costs are equal and the total is lowest.
Enter how many units you sell or use a year, what each order costs you regardless of size, and what it costs to hold one unit for a year.
| Annual demand (units) | 12000 |
| Cost per order (ordering / setup cost) | 500 |
| Holding cost per unit per year | 20 |
| Economic order quantity (units) | 775 |
| Orders per year | 15.49 |
| Days between orders | 23.56 |
| Annual ordering cost | 7,745.97 |
| Annual holding cost | 7,745.97 |
| Total annual inventory cost | 15,491.93 |
Order 775 units, 15.49 times a year.
Try this example →Economic order quantity: the order size that minimises the combined cost of ordering and holding inventory.
EOQ = √(2DS ÷ H), where D is annual demand, S the cost per order and H the annual holding cost per unit.
The cost of keeping stock: storage space, insurance, spoilage, and the interest on money tied up in inventory — often 20–30% of the item's value a year.