How it works
This continuous-quantity model balances order setup cost against average inventory holding cost under constant annual demand. This form solves for annual demand; enter the known quantities in Order quantity, Setup cost per order (same currency), Annual holding cost per unit (same currency).
Inputs and units
| Input | Example value | What to enter |
|---|---|---|
| Order quantity | 100 | Formula symbol: q. Enter a numeric value. Must be greater than zero. |
| Setup cost per order (same currency) | 50 | Formula symbol: s. Enter a numeric value. Must be greater than zero. |
| Annual holding cost per unit (same currency) | 10 | Formula symbol: h. Enter a numeric value. Must be greater than zero. |
Worked example
Show example inputs and results
This example is generated by the same calculation engine using the starting values in the form. Your own inputs produce your own result.
- Order quantity
- 100
- Setup cost per order (same currency)
- 50
- Annual holding cost per unit (same currency)
- 10
Complete example results
- Annual demand
- 1,000
Reading the result
The result solves for annual demand from the entered quantities. Check the result unit and the formula conditions before using it.
Questions and answers
Can I use the example values for my own calculation?
The example values illustrate the calculation. Replace every input with your own information, especially dates, rates and the selected operation.
When can I use the annual demand result?
Demand and per-unit holding cost use the same annual period. Stockouts, quantity discounts and whole-pack rounding are excluded. All monetary inputs must use the same currency; currency conversion, tax and automatic fees are excluded.
Why are some results rounded?
Results display up to 8 decimal places. Calculations use the unrounded values; very small values use scientific notation. JavaScript floating-point arithmetic can introduce tiny rounding differences.
Are my inputs sent to a server?
The calculator processes inputs in your browser. Its code does not send your values to a server.
Method sources: live.ocw.mit.edu