Economic order quantity (EOQ) formula

What is Economic order quantity (EOQ)?

Economic order quantity (EOQ) is the optimum number of products that a business should purchase in order to minimize holding and ordering costs. Knowing the EOQ  can help businesses save a significant amount of money through cost optimization. Economic order quantity is sometimes known as Economic purchase quantity.

Examples of Economic order quantity (EOQ)

Your EOQ is the optimum number of products you should purchase to minimize the total cost of ordering or holding stock. Figuring out your EOQ can potentially save you a significant amount of money.

Table/Chart

Your EOQ is the optimum number of products you should purchase to minimize the total cost of ordering or holding stock. Figuring out your EOQ can potentially save you a significant amount of money.

What is Economic order quantity (EOQ)?

Your EOQ is the optimum number of products you should purchase to minimize the total cost of ordering or holding stock. Figuring out your EOQ can potentially save you a significant amount of money.

Frequently Asked Questions

  • How is EOQ calculated?

    Determine the demand in units
    Determine the order cost (incremental cost to process and order)
    Determine the holding cost (incremental cost to hold one unit in inventory)
    Multiply the demand by 2, then multiply the result by the order cost.
    Divide the result by the holding cost.
    Calculate the square root of the result to obtain EOQ.
    In short: EOQ = square root of (2 x D x S/H) or √ (2DS / H)

  • What is minimum order quantity?

    A minimum order quantity is the fewest number of units required to be purchased at one time