Carrying Cost Of Inventory

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DEFINITION

This is the cost a business incurs over a certain period of time, to hold and store its inventory. Businesses use this figure to help them determine how much profit can be made on current inventory. It also helps them find out if there is a need to produce more or less, in order to keep up with expenses or maintain the same income stream.

Also referred to as carry cost of inventory.

INVESTOPEDIA EXPLAINS

Carrying cost of inventory is often described as a percentage of the inventory value. This percentage could include taxes, employee costs, depreciation, insurance, cost to keep items in storage, opportunity cost, cost of insuring and replacing items, and cost of capital that help produce income for a business.

Also referred to as inventory cost.


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