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EOQ Calculator with Total Cost Curve Chart

The economic order quantity balances the cost of placing orders against the cost of holding stock. This calculator draws the curve so you can see how flat the bottom is and what a different lot size really costs.

Your numbers

units/yr
$

Buyer time, receiving, invoice handling, or changeover cost.

$
22 %

Capital, storage, handling, insurance, obsolescence.

1,500 units

Your results

Economic order quantity
800
Total relevant cost at tested quantity
$3,073
Holding cost per unit per year
$3
Orders per year at EOQ
15.0059
Annual ordering cost at tested quantity
$680
Annual holding cost at tested quantity
$2,393
Total relevant cost at EOQ
$2,551
Extra cost versus EOQ
$522

Classic EOQ assumes constant demand, instant replenishment and no quantity discounts. Purchase price is excluded because it does not change with order size in this model.

Save results:

Annual cost vs order quantity

Sweeps Order quantity to test from 100 to 4000, holding your other inputs fixed.

Compare EOQ with every lot size in your ERP

Optional: an expert review of how to run EOQ across your item master and flag the largest cost gaps.

Optional. The tool and every export work without this. No spam.

How to use it

Enter annual demand, the cost to place one order (or run one setup), unit cost and your carrying cost rate. The EOQ appears at once. Then move the order quantity slider to the lot size you use today, such as a supplier minimum or a pallet multiple, and read the extra annual cost against EOQ. The chart plots ordering, holding and total cost across order sizes with the other inputs held constant.

The formula

EOQ = sqrt(2 x D x S / H), where D is annual demand, S is cost per order and H is holding cost per unit per year (unit cost x carrying rate). At EOQ, ordering cost equals holding cost, and total relevant cost is sqrt(2 x D x S x H). Ordering cost is D / Q x S and holding cost is Q / 2 x H, the average stock being half the order quantity.

  • Total cost is flat near the optimum
  • Doubling order cost raises EOQ by about 41%
  • Doubling the carrying rate lowers EOQ by about 29%

Reading the curve

Because the total cost curve is shallow around the minimum, order quantities within about 20 to 30 percent of EOQ cost only a few percent more. That gives you room to round to pallets, case packs or supplier break points without hurting the result. Large deviations hurt: ordering a quarter of EOQ multiplies the ordering cost four times. If the penalty shown is small, stop optimising and spend your time on parts where it is large.

Common mistakes

The most common error is using a purchasing department fully loaded cost as the cost per order, which inflates EOQ. Use only costs that vary with each order. The carrying rate is the second trap: use a rate that reflects your actual cost of capital, storage and obsolescence, not the default 25% from a textbook. Finally, remember EOQ ignores quantity discounts, minimum order values and shelf life, check those constraints before changing the ERP lot size.

Frequently Asked Questions

What carrying cost rate should I use?

Add cost of capital, storage and handling, insurance and taxes, and obsolescence or shrinkage. Many manufacturers land between 15% and 30% a year, but yours should be built from your own numbers.

Does EOQ work for manufactured items?

Yes, replace cost per order with setup cost and the equation is the same. For finite production rates, the economic production quantity adds a factor for the rate of production versus demand.

What if the supplier has a minimum order quantity?

Use the larger of EOQ and the minimum. Test the minimum on the slider to see the annual penalty, which is useful evidence when negotiating or choosing between suppliers.

How often should I recalculate EOQ?

At least annually and whenever demand, price or carrying rate shifts noticeably. Because the curve is flat, small changes rarely justify updating the ERP, large ones do.

If you want EOQ evaluated across every purchased item from ERP data and compared with the lot sizes loaded today, Netray can build that analysis for your ERP, read-only.

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