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 ?
HM: Freight, duty, carrying cost of inventory, travel cost, impact on innovation when engineering and manufacturing are close to each other and speak the same language, lost orders due to offshore inability to respond timely to order volatility, and the benefit of a Made in USA label.
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.