How this calculator works
Deciding how much stock to buy at once means balancing expensive frequent orders against the cost of keeping goods in storage. For example, 12,000 annual units with $45 per order and $8 unit cost can be optimized using a carrying-rate assumption.
What the calculation does
Compute annual carrying cost per unit from purchase price and holding rate, then apply the standard square-root EOQ relationship. The rounded recommendation is used to estimate annual order and holding costs.
Important limitations
Does not optimize quantity discounts, minimum orders, warehouse limits, cash flow, reorder timing or seasonal demand.
Common questions
What does EOQ optimize?
The combined annual cost of placing orders and carrying average cycle stock, assuming demand is stable.
Does EOQ replace a reorder point?
No. Reorder timing depends on demand during lead time and a suitable safety buffer.
Should suppliers' case packs override EOQ?
Compare feasible multiples and supplier minimums to the theoretical EOQ before ordering.