How the eoq calculator works
Ordering often means many order costs; ordering rarely means holding lots of stock. The economic order quantity, a formula from Ford W. Harris in 1913, balances the two.
Total cost = (D ÷ Q) × S + (Q ÷ 2) × H
Reorder point = Daily demand × Lead time + Safety stock
D is annual demand, S is the fixed cost per order (shipping, processing, receiving) and H is the cost of holding one unit for a year, often 15% to 30% of the unit's value to cover storage, capital, insurance and shrinkage. At the EOQ, ordering cost and holding cost are exactly equal. The model assumes steady demand and no quantity discounts; with price breaks, compare total costs at each break quantity.
Worked example
With annual demand of 10,000 units, $50 per order and $2 a year to hold each unit, EOQ = √(2 × 10,000 × 50 ÷ 2) = 707 units. That is about 14 orders a year, every 26 days, for a combined cost of $1,414.21. With a 7-day lead time, reorder when stock falls to about 192 units.
Frequently asked questions
What is economic order quantity?
The order size that minimises the sum of ordering and holding costs for steady demand.
What is holding cost?
The yearly cost of keeping one unit in stock, including storage, capital tied up, insurance and spoilage.
What is a reorder point?
The stock level at which to place a new order so it arrives before you run out.
Does EOQ work with bulk discounts?
Not directly. Calculate total cost, including purchase price, at the EOQ and at each discount quantity, and pick the lowest.
Updated October 2026. Results are estimates for education, not financial or medical advice. All math runs in your browser; nothing you type is sent anywhere.