How it works
For a fixed lot size, annual ordering cost is added to the holding cost of an average half-lot inventory. This form solves for cost per order (same currency); enter the known quantities in Annual ordering and holding cost (same currency), Annual demand, Lot size, Annual holding cost per unit (same currency).
Inputs and units
| Input | Example value | What to enter |
|---|---|---|
| Annual ordering and holding cost (same currency) | 1,500 | Formula symbol: c. Enter a numeric value. Use a non-negative value. |
| Annual demand | 10,000 | Formula symbol: d. Enter a numeric value. Must be greater than zero. |
| Lot size | 200 | Formula symbol: q. Enter a numeric value. Must be greater than zero. |
| Annual holding cost per unit (same currency) | 10 | Formula symbol: h. Enter a numeric value. Use a non-negative value. |
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 ordering and holding cost (same currency)
- 1,500
- Annual demand
- 10,000
- Lot size
- 200
- Annual holding cost per unit (same currency)
- 10
Complete example results
- Cost per order (same currency)
- 10
Reading the result
The result solves for cost per order (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 cost per order (same currency) result?
Purchase price, safety-stock holding and stockouts are excluded. Demand and holding cost share an annual period. 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