EOQ calculator with quantity discounts

The textbook Economic Order Quantity assumes a flat unit price. Real procurement doesn't. This tool computes the textbook EOQ and then compares the total annual cost across each of your price-break tiers — including the bulk discount — so you can see whether taking the discount is actually cheaper.

Runs in your browser Annual cost output Up to 4 price tiers

What this calculator is for

EOQ is a 1913 formula, and most online calculators stop at the textbook answer of √(2DS / H). That is fine for a homework problem. In a real procurement situation you almost always have a price-break schedule: order 800+ units and the unit price drops from $12.40 to $11.85. The textbook answer doesn't know about the discount. A procurement manager does.

This calculator computes the textbook EOQ and then evaluates total annual cost — purchase cost + ordering cost + carrying cost — at each of the discount tiers you supply. It then recommends the order quantity that minimizes total cost, not just EOQ-minimizing quantity.

Who uses this

Procurement managers deciding whether a bulk discount is actually worth taking (often it isn't, once you account for cash tied up and storage cost).

Operations managers building a reorder policy when a supplier sends over a new price list.

Finance teams modeling working-capital impact of a "buy more, save more" proposal.

Inputs explained

Annual demand (D): units per year, not per order. Pull this from POS or ERP for the last 12 months.

Order cost (S): the all-in cost to place one purchase order. Include admin time, freight booking fees, receiving labor, and any small-order handling fee your supplier charges.

Holding cost per unit per year (H): how much it costs to carry one unit for a full year. If you don't have a per-unit figure, use the Carrying Cost tool first and divide by your average inventory value.

Price tiers: up to 4 price breaks. Enter the minimum quantity and unit price for each. If you only have one price, just fill the first tier.

Calculator

Fill in your numbers, then click Calculate. The recommended order quantity, total annual cost, and a tier-by-tier comparison appear below.

How to read the output

The recommended quantity is the one with the lowest total annual cost across all tiers you specified. Sometimes that's the textbook EOQ (because the bulk discount doesn't cover the extra carrying cost). Sometimes it's the bulk-tier minimum (because the discount is large enough to dwarf the carrying cost). The table tells you which case you are in.

If the bulk tier wins, the difference between rows on the table is money you'll actually save per year. Multiply it by the procurement cycle you plan to run the recommendation through, and that's the defensible figure to put in front of finance.

What this calculator doesn't do

Doesn't model partial tier spend. We assume that once you cross a tier's minimum you buy all units at that tier's price. Real contracts sometimes price each tier incrementally (the first 800 at $12.40, the next 200 at $11.85). If yours does, call the result an approximation and re-do it carefully.
Doesn't model supplier capacity. If you order 5,000 at a time and your supplier's lead time triples on big orders, the carrying-cost advantage is offset by holding more pipeline inventory. Cross-check with the Lead Time Variance tool.
Doesn't model storage constraints. If your warehouse physically can't hold 5,000 units of one SKU, the right answer is to negotiate volume storage or a different SKU mix, not to order the EOQ and hope.
Doesn't model inflation, exchange rate movement, or supplier financial health. A bulk discount from a supplier who is about to go bust is not a saving.

Worked example

You sell 12,000 widgets/year. Each PO costs $85 to place. Holding cost is $6.20/unit/year. Your supplier offers:

1+ units at $12.40
800+ units at $11.85

Textbook EOQ = √(2 × 12,000 × 85 / 6.20) ≈ 574 units. At Q = 574, total annual cost = 12,000 × $12.40 + (12,000 / 574) × $85 + (574 / 2) × $6.20 = $148,800 + $1,778 + $1,780 = $152,358.

If you take the bulk tier at the minimum 800 units: annual cost = 12,000 × $11.85 + (12,000 / 800) × $85 + (800 / 2) × $6.20 = $142,200 + $1,275 + $2,480 = $145,955. The discount saves $6,403/year even after the higher carrying cost — the bulk tier wins.

Related tools

Carrying Cost — derive H with the 5-component breakdown.
Safety Stock — once EOQ is set, decide how much buffer to carry against demand swings.
Reorder Point — the trigger that fires when you should place the EOQ-sized order.
ABC Analysis — run EOQ only on A items first; the rest of your catalog rarely justifies the precision.

References

Silver, E.A., Pyke, D.F., & Thomas, D.J. (2016). Inventory and Production Management in Supply Chains. CRC Press. Ch. 4 covers the quantity-discount EOQ precisely.
Chopra, S. & Meindl, P. (2016). Supply Chain Management. Pearson. Ch. 12 for the total-cost framing.