The cost of holding inventory, usually defined as a percentage of the dollarvalue of inventory per unit of time (generally one year). Carryingcost depends mainly on the cost of capital invested as well as costs of maintaining the inventory such as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10 percent to 35 percent annually, depending on type of industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory. Syn: holding costs.
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