# Economical Order Quantity

You can use this calculator to minimize total costs by determining the most efficient inventory order size (the economical order quantity), and then getting ordering costs to equal carrying costs.

To open this calculator, click Calculators in the toolbar, and then click Economical Order Quantity in the left panel.

You can export the data as a PDF file or clear all data that you entered. For more information, see Financial calculators.

## Example

Your client purchases \$10,000 worth of food each year for a hunting lodge, but for each order, he has to drive two hours to get to the store. What is the most efficient or most economical food order size per trip?

Field Input
Inventory needed for 1 year \$10,000
Cost of placing an order \$100
Annual cost of money 8%
Other inventory costs 3%

In this example, the most efficient or most economical order size is \$4,264.01.

Notes

• The \$100 cost of placing an order includes the transportation cost to the store as well as the cost of your client's time.
• The annual cost of money is either the cost of money if you need to borrow it, or the opportunity cost of tying up money in inventory instead of investing it.
• The other inventory costs includes an annual spoilage percentage.
• This calculator uses the following equation:

Total Ordering Costs: Inventory needed for 1 year divided by EOQ, times Cost of placing an order

- equals -

Total Carrying Costs: [Inventory needed for 1 year divided by (inventory needed for 1 year divided by EOQ)] times 1/2 times carrying cost percentage.

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