Free inventory tool
EOQ calculator: how much to order at a time.
Enter what you use in a year, what an order costs to place and what a unit costs to hold. You get the economic order quantity, how often to order and the yearly cost, with every step shown.
- The EOQ formula, step by step
- Cost curve shown
- Nothing is sent or saved
EOQ calculator
How it’s worked out.
The formula and the costs that go into it, as ICAI teaches them in its cost-accounting study material.
The economic order quantity is the size of an order at which the total of ordering and carrying cost is lowest.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.23, checked 17 Oct 2026
EOQ = √(2 × A × O ÷ C), where A is the annual requirement, O the cost of placing one order and C the carrying cost of one unit for a year.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.24, checked 17 Oct 2026
Ordering costs come with each purchase: inviting quotations, preparing purchase orders, staff time spent on buying, transport and inspection.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.23, checked 17 Oct 2026
Carrying costs come with holding stock: the cost of the money invested in it, storage, insurance and obsolescence.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.23, checked 17 Oct 2026
Carrying cost can be stated as a percentage of the unit’s price. In ICAI’s example, storage 2%, interest 12% and obsolescence 6% make 20% of ₹20: ₹4 a unit a year.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.26, checked 17 Oct 2026
Orders a year are the annual requirement ÷ the EOQ. Carrying cost is worked out on the average stock, half the EOQ.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.25–2.26, checked 17 Oct 2026
The EOQ assumes ordering and carrying costs are known and fixed, usage is known, the unit price is constant, and each order arrives at once.
Source: ICAI study material, Cost and Management Accounting, Material Cost, p. 2.24, checked 17 Oct 2026
One example, step by step.
A distributor in Nagpur sells 3,000 cartons of biscuits a year. An order costs ₹960 to place. A carton costs ₹600, and holding it for a year costs 20% of that.
- Annual demand
- 3,000 cartons
- Cost of placing one order
- ₹960
- Holding cost a carton a year20% of ₹600
- ₹120
- Economic order quantity√(2 × 3,000 × 960 ÷ 120)
- 219.09 cartons
- Orders a year3,000 ÷ 219.09
- 13.69
- Days between orders365 ÷ 13.69
- 26.7
- Ordering cost a year13.69 × ₹960
- ₹13,145.34
- Holding cost a year219.09 ÷ 2 × ₹120
- ₹13,145.34
- Total cost a year, ₹
- 26,290.68
Order about 219 cartons, roughly every 27 days. At the EOQ, ordering and holding cost are equal.
An illustration in ₹. Rounding to 220 cartons, a lot of ten, costs ₹26,290.91 a year, 23 paise more: near the EOQ the total barely moves.
What it does not cover.
The classic EOQ rests on simple assumptions. Check these before you rely on the figure.
Demand that changes with the season
The formula assumes you sell at the same pace all year. If Diwali or the wedding season doubles your sales, work out an EOQ for each season instead.
Quantity discounts
The price of the goods is left out, as if it were the same at any order size. If a bigger order earns a lower price, compare the total cost, goods included, at the EOQ and at each price break.
Deliveries that are late or split
The model has each order arrive in full, the moment it is needed. Real lead times vary: set a reorder point with safety stock, using the reorder point calculator.
Goods you make yourself
When stock comes in over a production run, not all at once, the economic batch quantity uses a different formula.
Space, shelf life and supplier minimums
The EOQ ignores godown space, expiry dates and a supplier’s minimum order. Any of them can set the quantity for you.
GST
Use the cost of a unit without GST you can claim back as input tax credit. GST you can’t claim back is part of the cost.
More inventory tools.
How much to order, when to reorder, and what your stock is worth. And the tools that go with this one.
EOQ questions people ask.
What is the economic order quantity?
The number of units to order at a time so that the yearly cost of placing orders plus the yearly cost of holding stock is as low as it can be. Order more at a time and holding cost goes up; order less and you pay for more orders.
What is the EOQ formula?
EOQ = √(2 × D × S ÷ H), where D is the annual demand in units, S the cost of placing one order and H the cost of holding one unit for a year. ICAI’s study material writes it as √(2AO ÷ C), with A the annual requirement, O the cost per order and C the carrying cost per unit a year.
What goes into the cost of placing an order?
Costs that come with each order: preparing and sending it, follow-up calls, receiving and checking the goods, and freight you pay per order. Leave out costs you pay anyway, like a purchase clerk’s fixed salary.
What goes into the holding cost?
Interest on the money tied up in stock, godown rent and handling that rise with the stock you keep, insurance, and loss from damage, theft or expiry. Many businesses state it as a percentage of the unit’s cost; the calculator takes either.
Should I order exactly the EOQ?
No need. The total cost is flat near the EOQ, so rounding to a full case or pallet changes it very little. The calculator shows the cost of the rounded quantity beside the exact figure.
Does the EOQ tell me when to order?
No. The EOQ is how much to order. When to order is the reorder point: what you use while an order is on its way, plus safety stock.
Does it work with quantity discounts?
Not directly. With a discount, add the cost of the goods to the total and compare the EOQ against each price break. The cheapest total wins, even when it is above the EOQ.
Is what I type saved or sent anywhere?
No. The figures are worked out in your browser. Nothing is sent, stored or tracked by the calculator.
Can PrimoERP remind me to reorder?
Yes. Each item has a reorder level. When stock falls below it, you are told, and a purchase order is drafted for you to approve.
— the PrimoERP team
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