Optimal Batch Size Calculator

Formula

The formula to calculate the Optimal Batch Size (Q) is:

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

Where:

Optimal Batch Size (Q): The ideal order quantity a company should purchase to minimize its inventory costs, also known as the Economic Order Quantity (EOQ).
Demand Rate (D): The rate at which inventory is consumed or demanded.
Setup Cost (S): The cost associated with setting up a production run or placing an order.
Holding Cost (H): The cost to hold or store inventory over a period of time.
Significance: Calculating the optimal batch size helps businesses reduce their total inventory costs and improve overall efficiency.

Let's say the demand rate (D) is 1000 units, the setup cost (S) is $50, and the holding cost (H) is $2 per unit. Using the formula:

\[ Q = \sqrt{\frac{2 \times 1000 \times 50}{2}} = 223.61 \]

So, the Optimal Batch Size (Q) is approximately 223.61 units.