Small-business finance
Economic order quantity
Estimate the continuous order size balancing entered annual ordering and holding costs under the basic EOQ assumptions.
Your inputs
Complete the fields for your selected method. Zero means intentionally zero, not unknown. Currency selection labels amounts; it does not convert exchange rates.
How this calculation works
EOQ = sqrt(2 × annual unit demand × fixed order cost / annual holding cost per unit)
Basic steady-demand EOQ assumes constant unit price, known demand, instantaneous full replenishment and no stockouts. Only fixed ordering cost and cycle-stock holding cost are optimized; purchase cost, safety stock, quantity discounts, minimum order quantities, pack sizes, spoilage, capacity and cash constraints are excluded. The whole-unit result compares the adjacent feasible integers, not arbitrary pack quantities. It is not a purchase recommendation.
What information do I need?
Use records for the same job, equipment or accounting period. Only the fields for your selected entry method are required. An unknown amount is not zero.
Input definitions and where to find them
- Expected annual demand (units/year): Use the same item, accounting period and unit basis for matching records. Use your own records or a stated estimate; example figures are not benchmarks.
- Fixed cost to place and receive one order (currency/order): Use the same item, accounting period and unit basis for matching records. Incremental fixed administrative, receiving and transport cost per order. Exclude goods purchase cost and variable per-unit charges.
- Holding cost entry: Use the same item, accounting period and unit basis for matching records. Use your own records or a stated estimate; example figures are not benchmarks.
- Annual holding cost per unit (currency/unit/year): Use the same item, accounting period and unit basis for matching records. Annual carrying expense for one unit, including the components you intend to model. Used with: I know annual holding cost per unit.
- Purchase cost per unit (currency/unit): Use the same item, accounting period and unit basis for matching records. Use your own records or a stated estimate; example figures are not benchmarks. Used with: Unit cost and annual carrying rate.
- Annual carrying rate (%): Use the same item, accounting period and unit basis for matching records. Annual holding expense as a percentage of purchase cost. Do not use a monthly percentage. Used with: Unit cost and annual carrying rate.
Use the Where to find this value controls beside the inputs for available work-it-out helpers. Estimates remain your assumptions; a helper does not verify the source figures.
Worked example
Example amounts use US dollars (USD).
Example answer: Continuous modeled economic order quantity is 707.1068 units/order for the illustrative inputs below.
Example inputs
- Expected annual demand: 10,000.00 units/year
- Fixed cost to place and receive one order: 50.00 currency/order
- Holding cost entry: I know annual holding cost per unit
- Annual holding cost per unit: 2.00 currency/unit/year
- Continuous modeled economic order quantity
- 707.1068 units/order
- Nearby whole-unit quantity with lower modeled cost
- 707 units/order
- Orders per year at continuous quantity
- 14.142 orders/year
- Average cycle inventory at continuous quantity
- 353.553 units
- Annual ordering plus cycle holding cost at continuous quantity
- $1,414.21
- Annual holding cost per unit used
- $2.00
- Annual ordering plus cycle holding cost at nearby whole quantity
- $1,414.21
These illustrative values are not recommended rates or industry averages. Replace every example input with your own figures.
Use the result well
Estimate the continuous order size balancing entered annual ordering and holding costs under the basic EOQ assumptions.
Keep inputs on the same scope and time basis. Calculations retain precision internally; displayed values generally round to two decimal places, with extra precision for very small values and whole-unit rounding where required. Economic comparisons describe your supplied assumptions and do not guarantee future results.
This tool provides business arithmetic. It does not approve engineering designs, establish legal or tax treatment, select equipment or certify safe operating conditions.