Economic Order Quantity Calculator
Find the optimal order size that minimizes cost (EOQ).
Results update as you type.
How it works
The economic order quantity, or EOQ, is the order size that minimises the total cost of managing inventory, and this calculator finds it from your demand and cost figures. You enter the annual demand in units, the fixed cost of placing one order, and the cost to hold one unit in inventory for a year, and it returns the EOQ along with how many orders per year that implies. The EOQ solves a fundamental trade-off in inventory management. Ordering in large batches means placing fewer orders, which cuts ordering and setup costs, but it leaves more stock sitting in the warehouse, raising holding costs like storage, insurance, and tied-up capital. Ordering in small batches does the opposite. The EOQ formula finds the sweet spot where the total of ordering and holding costs is lowest, which occurs when those two costs are equal. It is one of the oldest and most widely taught models in operations management, used to set reorder quantities, plan purchasing, and control working capital. The classic model assumes steady demand and constant costs; real situations with discounts, variability, or lead-time changes may need extensions, but the EOQ remains a valuable baseline. Enter annual demand, order cost, and holding cost to compute the economic order quantity.
EOQ = √(2·D·S / H)
The economic order quantity is the square root of twice the annual demand times the cost per order, divided by the holding cost per unit per year. It is the order size that minimises the combined cost of ordering and holding inventory. Larger orders reduce ordering costs but raise holding costs; the EOQ balances the two.
Source:Operations management
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Worked example
How to use this calculator
- 1
Enter your values
Enter annual demand (units), cost per order and holding cost per unit / year.
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Economic order quantity updates instantly as you type — no button to press.
Frequently asked questions
What is economic order quantity?
Economic order quantity, or EOQ, is the ideal number of units to order at a time to minimise the total cost of ordering and holding inventory. It balances the cost of placing orders against the cost of storing stock, giving the order size where their combined cost is lowest, a cornerstone of inventory management.
How is EOQ calculated?
EOQ equals the square root of twice the annual demand multiplied by the cost per order, divided by the annual holding cost per unit. Enter those three values and the calculator evaluates the formula. The result is the order quantity that minimises total inventory cost, along with the implied number of orders you would place per year.
What trade-off does EOQ balance?
It balances ordering costs against holding costs. Ordering large quantities means fewer orders and lower ordering costs, but more inventory sitting in storage, raising holding costs. Ordering small quantities reverses this. The EOQ is the point where these opposing costs are equal and their sum is minimised, giving the most economical order size.
What are holding costs?
Holding, or carrying, costs are the expenses of keeping inventory over time. They include warehouse space, insurance, taxes, spoilage or obsolescence, and the opportunity cost of capital tied up in stock. Holding cost is usually expressed per unit per year and is a key input to EOQ, since higher holding costs push toward smaller, more frequent orders.
What are the limitations of the EOQ model?
The classic EOQ assumes constant demand, fixed ordering and holding costs, instant replenishment, and no quantity discounts. Real businesses face variable demand, bulk discounts, and lead times, which the basic model ignores. Extensions handle these cases, but even so, EOQ provides a useful starting benchmark for setting order quantities before adjusting for real-world factors.