Eoq Calculator

Step-by-Step Guide to Using the EOQ (Economic Order Quantity) Calculator

Introduction

The EOQ Calculator is designed to help businesses and individuals determine the optimal order quantity that minimizes the total inventory costs while considering annual demand, ordering costs, holding costs, and unit costs. Follow this step-by-step guide to effectively use the calculator.

Step 1: Input Required Information

To begin the calculation, gather the necessary data and input it into the appropriate fields. The required inputs are:

• Annual Demand (D): Enter the total quantity demanded for the year. This field is mandatory, and the value must be at least 1.
• Ordering Cost (S): Specify the cost incurred every time an order is placed. This is a mandatory field, and the value should be at least 0.01.
• Annual Holding Cost per Unit (H): Input the cost to hold one unit of inventory for a year. This value is required and must be at least 0.01.
• Unit Cost (P): Enter the cost of a single unit of product. This is a necessary input with a minimum value of 0.01.

Step 2: Calculate the Economic Order Quantity (EOQ)

After entering the required data, the calculator will compute the Economic Order Quantity (EOQ) using the formula:

EOQ = sqrt((2 * Annual Demand * Ordering Cost) / Holding Cost)

The EOQ represents the optimal number of units to order to minimize total inventory costs. The result is rounded to the nearest whole number.

Step 3: Determine the Number of Orders per Year

Using the calculated EOQ, the calculator will determine how many orders should be placed annually by using:

Number of Orders = Annual Demand / EOQ

This result provides the frequency of orders, and it is displayed with two decimal points for precision.

Step 4: Compute the Time Between Orders

The calculator then computes the Time Between Orders in days using the following formula:

Time Between Orders = (365 / Number of Orders)

This information helps schedule orders and manage inventory levels efficiently. The result will be displayed with one decimal place and include a ‘days’ suffix.

Step 5: Calculate Total Costs

The calculator will provide detailed cost breakdowns to offer insights into different aspects of inventory management:

• Total Annual Ordering Cost: Calculated by multiplying the number of orders by the ordering cost, resulting in a currency format with two decimal points.
• Total Annual Holding Cost: Determined using the formula (EOQ / 2) * Holding Cost, presented in a currency format.
• Total Annual Inventory Cost: This is the sum of total ordering and total holding costs, shown in a currency format.
• Total Annual Purchase Cost: Determined by multiplying the annual demand with the unit cost, labeled in currency format.
• Total Annual Cost: The culmination of total inventory cost and total annual purchase cost, providing an overall financial summary, displayed in currency format.

Conclusion

The EOQ Calculator is an invaluable tool for optimizing order quantities and reducing associated inventory costs. By following this guide, you can effectively gather necessary data, input it accurately, and analyze the results to make informed business decisions.