Free tool · Stock planning
EOQ Calculator
Find the order size that keeps ordering and holding costs lowest, and test a supplier’s quantity discount
- Free
- No signup
- Indian rules
Demand and ordering
Carrying cost
Quantity discount
· optionalCheck a quantity discount offer
The supplier gives a lower price if each order is at least a set quantity.
Good to know
- ICAI defines EOQ as the order size at which the total of ordering cost and carrying cost is the lowest. At EOQ the two are equal.
- Ordering cost covers quotations, purchase orders, staff time on buying, transport and inspection per order. Carrying cost covers money tied up in stock, storage, insurance and obsolescence.
- EOQ assumes steady, known demand, a fixed price, fixed ordering and carrying costs, and goods that arrive the moment you order. Add safety stock for real lead times.
- Orders a year can come out as a fraction. In practice you round the order size to a pack or truck load, and the costs move only a little.
Results
Economic order quantity
1,200 units
About 20 orders a year, one every 18.3 days
How the EOQ is worked out
C = 20% × ₹250 = ₹50 per unit per year
EOQ = √(2 × A × O ÷ C)
= √(2 × 24,000 × ₹1,500 ÷ ₹50)
= √14,40,000 = 1,200 units
Quantity discount check
| Per year | At EOQ | With discount |
|---|---|---|
| Order size | 1,200 | 3,000 |
| Unit price | ₹250 | ₹245 |
| Purchase cost | ₹60,00,000 | ₹58,80,000 |
| Ordering cost | ₹30,000 | ₹12,000 |
| Carrying cost | ₹30,000 | ₹73,500 |
| Total cost | ₹60,60,000 | ₹59,65,500 |
With discount: 24,000 ÷ 3,000 = 8 orders; carrying cost = 3,000 ÷ 2 × ₹49 (20% of the discounted price).
Planning estimate only, using the ICAI Material Cost method and a 365-day year. It assumes steady demand and no stock-outs. Set your reorder level separately, using lead time and safety stock.
How it works
What this tool does.
Work out the Economic Order Quantity from annual demand, the cost of one order and the carrying cost. See orders a year, days between orders, ordering, carrying and total inventory cost, and whether a quantity discount is worth taking.
Enter how many units you use in a year, what it costs to place one order, the unit price and the carrying cost, either as a % of price or as rupees per unit per year. The calculator applies the EOQ formula from the ICAI Material Cost chapter and shows the working. It then gives the number of orders a year, the days between orders on a 365-day year, the annual ordering and carrying cost, and the total cost including the purchase price. If a supplier offers a lower price for a bigger order, switch on the discount check. It compares the total cost at EOQ with the total cost at the discount quantity, with carrying cost worked out again at the lower price when it is a % of price, and tells you which is cheaper and by how much.
Rules and dates last reviewed: October 2026
EOQ Calculator formula
EOQ = √(2 × A × O ÷ C), where A is the annual requirement in units, O is the cost of placing one order and C is the carrying cost per unit per year (carrying cost % × unit price, if given as a %). Orders a year = A ÷ EOQ. Days between orders = 365 ÷ orders a year. Annual ordering cost = orders a year × O. Annual carrying cost = EOQ ÷ 2 × C. Total inventory cost = A × unit price + ordering cost + carrying cost. For a quantity discount, total cost is worked out again at the discount quantity and the discounted price, and the lower total wins.
Worked example
A pump maker in Pune uses 24,000 ball bearings a year at ₹250 each. Placing and receiving one order costs ₹1,500, and carrying cost is 20% of the price a year. The supplier offers 2% off if each order is at least 3,000 bearings.
- Carrying cost per bearing per year: 20% × ₹250 = ₹50
- EOQ = √(2 × 24,000 × ₹1,500 ÷ ₹50) = √14,40,000 = 1,200 bearings
- Orders a year: 24,000 ÷ 1,200 = 20, so one order every 365 ÷ 20 = 18.25 days (shown as 18.3)
- Ordering cost: 20 × ₹1,500 = ₹30,000. Carrying cost: 1,200 ÷ 2 × ₹50 = ₹30,000
- Total at EOQ: ₹60,00,000 purchase + ₹30,000 + ₹30,000 = ₹60,60,000
- With the discount: price ₹245, carrying cost 20% × ₹245 = ₹49. The EOQ at ₹245 is about 1,212, below 3,000, so the order size is 3,000
- Orders a year: 24,000 ÷ 3,000 = 8, so ordering cost is 8 × ₹1,500 = ₹12,000. Carrying cost: 3,000 ÷ 2 × ₹49 = ₹73,500
- Total with discount: ₹58,80,000 purchase + ₹12,000 + ₹73,500 = ₹59,65,500
The EOQ is 1,200 bearings, ordered 20 times a year, for a total cost of ₹60,60,000. Taking the 2% discount at 3,000 bearings brings the total down to ₹59,65,500, a saving of ₹94,500 a year, provided you have the space and cash to hold the larger lots.
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Questions
EOQ Calculator, answered.
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What is the EOQ formula?
EOQ = √(2AO ÷ C). In the ICAI Material Cost chapter, A is the annual requirement in units, O is the cost of placing one order and C is the carrying cost per unit per year. If carrying cost is given as a %, multiply it by the unit price to get C.
How do you calculate EOQ?
Multiply annual demand by the ordering cost and by 2, divide by the carrying cost per unit per year, then take the square root. In ICAI Illustration 3, a firm uses 10,000 kg a year, spends ₹50 per order and pays ₹2 per kg with carrying cost at 8%. C is 8% × ₹2 = ₹0.16, so EOQ = √(2 × 10,000 × 50 ÷ 0.16) = 2,500 kg, or 4 orders a year.
What is carrying cost in EOQ?
It is the cost of holding stock for a year: interest on the money tied up, storage, insurance and obsolescence. It is usually set as a % of the unit price. In ICAI Illustration 4, storage of 2%, interest of 12% and obsolescence of 6% add up to a carrying cost of 20% a year.
How do you use EOQ with a quantity discount?
Compare the total annual cost at EOQ with the total at the discount quantity. Include the purchase cost, because that is where the discount saves money. Work out carrying cost again at the lower price when it is a % of price. In the ICAI exercise on component Alpha, 8,000 units a year at ₹400 with ₹200 per order and 20% carrying cost give an EOQ of 200 units and a total of ₹32,16,000. A 4% discount for orders of 4,000 gives ₹32,26,000, so the discount is turned down.
Why are ordering cost and carrying cost equal at EOQ?
Ordering cost falls as order size grows, because you order less often. Carrying cost rises, because average stock is half the order size. EOQ is the order size where the total of the two is lowest, and with this formula that is the point where they are equal. In the example above, both are ₹30,000.
What does EOQ assume?
ICAI lists four assumptions: ordering cost per order and carrying cost per unit are known and fixed, annual usage is known, the unit price is constant, and goods arrive as soon as they are ordered. Real purchases have lead time and uneven demand, so set the reorder level and safety stock separately.
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