Calculator

How Much Should You Order?

With 12,000 units/year demand, $50 per order, $10 unit cost, and 20% holding cost ($2/unit/yr), the EOQ is about 775 units — about 15.5 orders/year — minimizing the combined ordering and holding cost.

Results

Visualization

Cashbizly provides illustrative business estimates only. Results depend on your inputs and assumptions and are not accounting, tax, or legal advice. Consult a CPA or financial advisor before major decisions. Tax-year figures (mileage, QBI, SEP, etc.) are labelled by year and should be verified at IRS.gov.

How It Works

EOQ = sqrt(2 x D x S / H), where D = annual demand, S = cost per order, H = holding cost per unit per year (unit cost x holding %). It balances the trade-off: small frequent orders raise ordering cost, large orders raise storage cost. This is the classic Wilson EOQ formula from operations management.

What Should You Do?

Scenario 1: cutting cost-per-order to $25 raises EOQ to ~1,095 (fewer, larger orders). Scenario 2: a higher holding cost (30%) shrinks EOQ to ~632. Scenario 3: demand swings make the point estimate move — rerun as demand changes.

Frequently Asked Questions

What is a realistic holding cost?

Often 15-30% of unit cost annually (storage, capital, spoilage, insurance). Underestimating inflates EOQ.

Does EOQ assume steady demand?

Yes — constant demand and instant replenishment. Add safety stock separately (see Reorder Point).

Why minimize total cost, not just holding?

Because ordering cost rises as you hold less; the minimum is where the two curves cross.

Authoritative References

Investopedia — EOQ — Wilson EOQ formula and assumptions.
Corporate Finance Institute — Inventory — Inventory cost trade-offs.