Carrying Cost of Inventory

Carrying Cost of Inventory

The cost to a business of storing its inventory over a period of time. It includes taxes, insurance, the physical cost of storage, and opportunity cost. It does not include depreciation, if any. For example, if a business sells perishable goods and some of them spoil before they are sold, the carrying cost of inventory includes the costs associated with insuring and/or replacing the spoiled goods.
References in periodicals archive ?
When all costs are taken into consideration, including logistics, transportation and the carrying cost of inventory (among others), it often makes economic sense to repatriate manufacturing jobs from distant geographies such as the Far East.
All items are dropped shipped relieving the burdened of carrying cost of inventory.
They rose into top corporate echelons in response to inflation, which had drastically changed not only interest rates but time horizons, the carrying cost of inventory, depreciation calculations and taxation of capital gains.
Two tax inventory methods, LIFO and uniform capitalization (UNICAP), provide opportunities to decrease the tax carrying cost of inventory and to improve cashflow in the face of these inventory trends.
These susceptible components are consumer durables outlays (long-lived and heavily dependent upon installment credit); the outlays of business for plant and equipment (also long-lived and credit-dependent); residential building (again, long-lived and credit-dependent); and changes in business inventories (not long-lived, of course, but highly sensitive to the expectations of businesses with respect to future business volume and prices, and very sensitive to interest rate developments, because the carrying cost of inventory is largely a function of the prevailing short-term interest rate).
The Company expects that this decision will result in the reduction of expenses as they relate to the carrying cost of inventory in the future.