# Recommended order quantity

Last updated August 16, 2023

## What does it mean?

Recommended order quantity refers to the optimal quantity of an item that should be ordered in a single shipment to minimize costs and maximize efficiency. It is the quantity that is most likely to help a company balance between ordering too frequently and incurring high ordering costs, and ordering too infrequently and incurring high carrying costs or costs.

## How do you calculate the recommended order quantity?

It is often calculated using the Economic Order Quantity (EOQ):

EOQ = √2DSH,

where *D* is the demand in units, typically on an annual basis, *S* refers to the order costs per purchase order, and *H* indicates the holding costs per unit per year.

## FAQ

### Q: What is the Economic Order Quantity (EOQ)?

EOQ is a formula that calculates the order quantity that minimizes the total costs of ordering and holding inventory.

### Q: What is the relationship between order quantity and costs?

Ordering costs decreases as order quantity increases, while holding costs increase as order quantity increases.

### Q: What factors affect the recommended order quantity?

Factors include demand variability, ordering costs, holding costs, , and desired .