EOQ (Economic Order Quantity) Calculator

Formula

The formula to calculate the Economic Order Quantity (EOQ) is:

\[ EOQ = \sqrt{\frac{2DS}{H}} \]

Where:

$ D $ is the demand in units per year
$ S $ is the order cost ($)
$ H $ is the holding cost ($)

EOQ Definition

EOQ (Economic Order Quantity) is the ideal quantity to be ordered by a company to minimize holding costs, shortage costs, and order costs. The EOQ formula helps businesses determine the most cost-effective quantity of inventory to order, balancing the costs associated with ordering and holding inventory.

Example Calculation

Let's assume the following values:

Demand (D) = 1000 units/year
Order Cost (S) = $50
Holding Cost (H) = $2

Using the formula to calculate the Economic Order Quantity:

\[ EOQ = \sqrt{\frac{2 \times 1000 \times 50}{2}} = \sqrt{50000} \approx 223.61 \text{ units} \]

The Economic Order Quantity is approximately 223.61 units.