Economic order quantity
Compare annual ordering and holding costs with the EOQ model.
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Formula & assumptions
EOQ = √(2 × annual demand × fixed ordering cost ÷ annual holding cost per unit). Annual cost(Q) = D/Q × S + Q/2 × H
Assumes constant known annual demand, fixed ordering costs, immediate complete delivery and constant holding cost per unit per year. No shortages, discounts, minimum quantities or capacity limits. Costs include ordering and cycle stock holding only; purchases, safety stock and transport are not valued separately. Theoretical continuous quantities without pack rounding.
Display values are rounded; calculations use no intermediate rounding. Adjust results for indivisible quantities, pack sizes and operational requirements.
Method reference: Oracle Inventory: Reorder Point Planning.
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