Carrying cost of Inventory or carry cost is the total cost of managing inventory. It includes tax, opportunity cost, salary, insurance, inventory hold cost etc.
Carrying cost helps a business to analyze profit percentage they would get using current inventory also helps to decide whether there is any need to produce more products or not.
Carrying cost fall into four categories:
- Cost used for storing inventory
- Salary of workers
- Maintenance cost
- Utilities used to maintain inventory