Inventory carrying cost - How To Discuss

The cost of holding goods in stock. Expressed usually as a percentage of the inventory value and includes cost of capital, warehousing, depreciation, insurance, taxation, obsolescence, and shrinkage. Also called inventory cost.

Inventory carrying cost, or carrying costs, is an accounting term that identifies all business expenses related to holding and storing unsold goods. The total figure would include the related costs of warehousing, salaries, transportation and handling, taxes, and insurance as well as depreciation, shrinkage, and opportunity costs.

Total carrying costs are often shown as a percentage of a business' total inventory in a particular time period. The figure is used by businesses to determine how much income can be earned based on current inventory levels. It also helps a business determine if there is a need to produce more or less to maintain a favorable income stream.