Calculating your economic order quantity is straightforward once you know the Economic Order Quantity formula and what each input means. This guide explains the method in plain language, walks through a manual calculation, and gives worked examples you can follow — then you can do it instantly with the Economic Order Quantity Calculator.
What is Economic Order Quantity?
The Economic Order Quantity calculation tells you your economic order quantity from a few simple inputs. The figure you are solving for here is the economic order quantity.
The Economic Order Quantity formula
The core formula is:
Economic order quantity = √(2 × Annual demand (units) × Cost per order ÷ Holding cost per unit ÷ year)Here is what each input means:
- Annual demand (units) — a number. Example: 10,000.
- Cost per order — a money amount. Example: ₹50.
- Holding cost per unit/year — a money amount. Example: ₹2.
How to calculate it step by step
- Write down the annual demand (units) (for example, 10,000).
- Write down the cost per order (for example, ₹50).
- Write down the holding cost per unit/year (for example, ₹2).
- Apply the formula above to get your economic order quantity.
- Double-check the result with the Economic Order Quantity Calculator.
Worked examples
Example 1
| Input / Output | Value |
|---|---|
| Annual demand (units) | 10,000 |
| Cost per order | ₹50 |
| Holding cost per unit/year | ₹2 |
| Economic order quantity | 707 |
| Orders per year | 14.1 |
With annual demand (units) of 10,000, cost per order of ₹50 and holding cost per unit/year of ₹2, the economic order quantity works out to 707.
Example 2
With annual demand (units) of 20,000, cost per order of ₹50 and holding cost per unit/year of ₹2, the economic order quantity works out to 1,000.
| Result | Value |
|---|---|
| Economic order quantity | 1,000 |
| Orders per year | 20.0 |
Example 3
With annual demand (units) of 5,000, cost per order of ₹50 and holding cost per unit/year of ₹2, the economic order quantity works out to 500.
| Result | Value |
|---|---|
| Economic order quantity | 500 |
| Orders per year | 10.0 |
Tips for an accurate result
- Keep your units consistent — mixing, say, months with years or grams with kilograms is the most common source of error.
- Round only at the very end. Rounding inputs early can shift the final answer noticeably.
- Re-run the numbers whenever an input changes, rather than estimating from an old result.
Prefer not to do the maths by hand? — the Economic Order Quantity Calculator does it instantly, for free, with the formula and a worked example built in.
Related calculators
Continue exploring business calculators with these tools: Discount Calculator, Price Elasticity of Demand Calculator, Profit Margin Calculator, Gross Profit Calculator, ROI Calculator.