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EOQ = √(2 × D × S ÷ H)

EOQ calculator

Enter annual demand, the cost of placing one order and the cost of holding one unit for a year. The page returns the order size that minimises total cost.

Short answer: 10,000 units a year, ₹500 to place an order and ₹25 to hold a unit gives an EOQ of about 632 units — roughly 16 orders a year, or one every 23 days, at a total inventory cost near ₹15,811.

Why the two costs meet

Ordering cost is divided by the order size, holding cost is multiplied by it. Large orders mean few placements but a lot of stock; small orders mean the reverse. The minimum sits where they cross, so the page prints both components: if they are not equal, something in the inputs is off.

Worked example

A workshop uses 2,400 units a year, pays ₹300 per order and ₹40 per unit per year to store. EOQ = √(2 × 2400 × 300 ÷ 40) = 190 units, so 12.6 orders a year. Ordering 500 instead would raise holding cost more than it saves on paperwork.

EOQ questions

What is the EOQ formula?

EOQ = √(2 × annual demand × cost per order ÷ holding cost per unit per year). It is the order size where the cost of ordering often and the cost of holding stock meet, so total inventory cost is at its lowest.

Why is the total cost lowest there?

Ordering cost falls as the order size grows (fewer orders) while holding cost rises (more stock on average). One decreases and the other increases, so the sum has a minimum — and at that point the two components are equal, which the page prints so you can check it.

What does EOQ not include?

Quantity discounts, minimum order quantities, lead-time variability and storage constraints. EOQ is the theoretical optimum; a supplier’s price break often justifies ordering more, and this page does not pretend otherwise.

Related tools

Financial ratios calculatorInventory sits inside the current ratio.Break-even calculatorContribution per unit and fixed-cost cover.Depreciation calculatorThe cost of the assets being ordered.