# Economic Order Quantity

Written by Jerry Ratzlaff on . Posted in Manufacturing Engineering

Economic order quantity, abbreviated as EOQ, is the ideal order quantity that a company should make for its inventory given a set cost of production.

## Economic Order Quantity Formula

 $$\large{ EOQ = \frac{ 2 \; D \; CPU }{ HC } }$$

### Where:

$$\large{ EOQ }$$ = economic order quantity

$$\large{ D }$$ = demand in units (typically on an annual basis)

$$\large{ HC }$$ = holding cost (per unit, per year)

$$\large{ CPU }$$ = cost per order (per purchase order)