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 holding cost per unit (same currency); enter the known quantities in Annual demand, Setup cost per order (same currency), Order quantity.
Inputs and units
| Input | Example value | What to enter |
|---|---|---|
| Annual demand | 10,000 | Formula symbol: d. 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. |
| Order quantity | 100 | Formula symbol: q. 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.
- Annual demand
- 10,000
- Setup cost per order (same currency)
- 50
- Order quantity
- 100
Complete example results
- Annual holding cost per unit (same currency)
- 100
Reading the result
The result solves for annual holding cost per unit (same currency) 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 holding cost per unit (same currency) 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