Accounting Economic Order Quantity (Per-Unit) Calculator
Calculate the optimal order quantity using annual demand, ordering cost, and annual holding cost per unit.
Overview
Use this Accounting Economic Order Quantity (EOQ) calculator to estimate a cost-efficient order size from annual demand, the cost of placing an order, and the annual holding cost for each unit. Add the unit purchase cost to see an estimated total annual inventory cost.
How it works
The calculator uses the standard EOQ formula: the square root of twice annual demand multiplied by ordering cost, divided by annual holding cost per unit. At this quantity, annual ordering cost and annual holding cost are approximately equal. It also estimates order frequency, average inventory, and costs using the calculated order quantity.
How to use this calculator
- 1Enter the number of units you expect to use or sell in a year.
- 2Enter the full cost of placing and receiving one order.
- 3Enter the annual inventory holding cost for one unit.
- 4Add the supplier purchase cost per unit.
- 5Review the suggested order quantity, order frequency, and annual inventory costs.
Example Calculation
Annual demand
10000
Ordering cost per order
$50
Annual holding cost per unit
$3
Purchase cost per unit
$20
Working days per year
250
Economic order quantity
632 units
For annual demand of 10,000 units, a $50 ordering cost, and a $2.50 annual holding cost per unit, the EOQ is about 632 units. This requires about 15.8 orders per year, or one order roughly every 15.8 working days.
Frequently asked questions
What is economic order quantity?
Economic order quantity is the order size intended to minimize the combined annual cost of ordering inventory and holding inventory.
What does per-unit holding cost mean?
It is the estimated annual cost of keeping one unit in stock. It can include storage, insurance, handling, spoilage risk, and the cost of money tied up in inventory.
Does the purchase price affect the basic EOQ calculation?
Not when the unit price stays the same regardless of order size. It is included here to estimate total annual inventory cost.
Why are ordering and holding costs similar at EOQ?
The EOQ formula identifies the balance point where reducing one of these costs by changing order size would increase the other cost by a similar amount.
Should I round the calculated EOQ?
Usually, round to a practical whole-unit amount that fits supplier pack sizes, storage limits, and ordering procedures.
Can I use EOQ when suppliers offer quantity discounts?
Use caution. Quantity discounts can change the best order size because the unit purchase price may decrease at higher order quantities.
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Assumptions and warnings
Assumptions
- Demand is steady and known throughout the year.
- Each order is received in one delivery and replenishment is available when needed.
- The unit purchase price is constant and no quantity discounts apply.
- Holding cost is entered as an annual cost for each unit held in stock.
- Results are planning estimates and exclude stockouts, safety stock, taxes, and unusual supply disruptions.
Warnings
- This calculator provides an inventory planning estimate only and should be used alongside current supplier, storage, and demand information.
- EOQ may not be suitable where demand is highly variable, lead times are uncertain, or quantity discounts are significant.