Economic Order Quantity (EOQ)

How to use this calculation

For 1,000 units/year, 2 currency units per order and 5 per unit/year in holding cost, the theoretical EOQ is 28.2843 units. Comparing adjacent whole-unit costs gives 28 units/order, with 141.4286 in annual ordering plus cycle-stock holding costs.

• The classical model assumes steady demand, fixed ordering and holding costs, and replenishment without stockouts. Seasonal demand, quantity discounts, minimum orders and supplier pack sizes can require a different policy.
• The whole-unit quantity minimizes the model cost among the adjacent positive integers, rather than always rounding up. Average cycle stock excludes safety stock; annual ordering plus holding cost excludes purchasing cost and other fixed costs. Orders/year and intervals are long-run averages, not a dated purchase schedule.
• Demand and both costs must be positive. Use one currency and annual units; a carrying-cost percentage must first be converted to a cost per unit per year. This estimates order size, not a reorder trigger, and places no purchase order.

Formula reference: Investopedia: Economic Order Quantity formula and example. General planning information, not a guarantee of business results.