Economic Order Quantity Calculator
Instructions: You can use this Economic Order Quantity Calculator, by providing the yearly demand, setup and ordering costs, using the form below:
Economic Order Quantity (EOQ) Calculator
More about the Economic Order Quantity for you to have a better understanding of the results provided by this solver.
The economic order quantity is a type of inventory policy that computes the order quantity \(EOQ\) that minimizes the total annual inventory costs, that consists of the sum of the annual setup costs and the annual holding costs.
How do you calculate order quantity in EOQ?
EOQ is one of the mostly commonly used inventory models. The idea is to find an order quantity Q* that is optimal in the sense that it minimizes the total inventory costs.
In general terms, the inventory costs are setup costs, holding costs and costs of the units. In this model the cost of the units is assumed to be fixed (exogeneous) and we are concerned with minimizing the sum of setup costs and holding costs.
Choosing an quantity order Q is a balancing act. On the one hand, a large order size will require few orders per year, and then reducing the total setup cost, larger orders will have higher inventory costs.
Economic Order Quantity Formula
This optimal order quantity is computed by means of the following formula:
\[ EOQ = \sqrt{\frac{2DS}{H}} \]Depending on the assumptions linked to the process, other inventory policies could be used, such as the production order quantity model .
How do you calculate EOQ in Excel?
The EOQ formula is a simple one and it is simple to conduct in Excel. You probably will use some formula like "=SQRT(2*A1*A2/A3)".
In this case A1 is the cell where you store the annual demand, A2 is where you store the setup cost and A3 is where you store the holding cost.
EOQ formula with example
Assume that you have a yearly demand of 12,000, with a setup of $30, and a holding cost of $8. The economic order quantity is
\[ EOQ = \sqrt{\frac{2DS}{H}} = \sqrt{\frac{2 \times 12,000 \times 30}{8} } = 300 \]Other Inventory Models
The calculation of the optimal order quantity is very much strongly dependent on the assumptions used. EOQ makes very specific assumptions. There are other models such as the single period model or the production order quantity.
