What is economic order quantity (EOQ)?

EOQ is the order quantity that minimizes total inventory cost — the sum of ordering cost and holding cost. Order more at once and you order less often (lower ordering cost) but carry more stock (higher holding cost); EOQ is the size where those two are balanced.

How is EOQ calculated?

EOQ = the square root of (2 × annual demand × ordering cost ÷ holding cost per unit per year). Annual demand is in units, ordering cost is the fixed cost to place one order, and holding cost is what it costs to carry one unit for a year.

What holding cost do I use in EOQ?

Use the annual holding cost for a single unit, in dollars. That is your carrying-cost rate applied to the cost of one unit — for example, a 25% carrying rate on a $50 unit is $12.50 per unit per year. The carrying cost calculator produces this figure directly.

Economic Order Quantity Calculator

Find the order size that costs the least over a year — where ordering less often and carrying less stock meet in the middle. Enter your holding cost per unit, or derive it from a unit cost and carrying rate, and get the EOQ plus how often you’d order and what it all costs.

Annual demand (units/year)

Ordering cost ($ per order)

Holding cost ($ per unit per year)

Cost per unit ($)

Carrying-cost rate (%/year)

Economic order quantity

units per order

Orders per year —

Days between orders —

Annual ordering + holding cost —

What EOQ solves

Every reorder faces a trade-off. Order in big batches and you place fewer orders — less ordering cost — but you sit on more stock, so holding cost climbs. Order little and often and it flips. The economic order quantity is the batch size where those two costs balance and the total is at its lowest.

EOQ = √( 2 × annual demand × ordering cost ÷ holding cost per unit )

The three inputs

Annual demand is how many units you move in a year. Ordering cost is the fixed cost of placing one order — the paperwork, receiving, and setup, regardless of size. Holding cost is what it costs to carry a single unit for a year, in dollars — your carrying-cost rate times the cost of one unit. Switch to From unit cost & rate and this tool works it out for you.

What you get back

Beyond the quantity itself, you’ll see how many orders that means per year, how many days sit between them, and the total annual ordering-plus- holding cost. A useful check: at the true EOQ, annual ordering cost and annual holding cost come out equal — that’s the bottom of the cost curve.

EOQ assumes steady demand and a fixed ordering cost. Treat it as a strong starting point, then adjust for supplier minimums, price breaks, and shelf life.