# Economical Order Quantity Calculator

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

## Example

Your client purchases \$10,000 worth of food each year for his hunting lodge, but each time he places an order he has to drive two hours to get to the store. How much food should he buy 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 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 having money tied up in inventory instead of investing.
• The other inventory costs includes an annual spoilage percentage.
• The equation behind this calculator is:

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.