Free Inventory Carrying Cost Calculator
Calculate inventory carrying cost to determine the total annual expense of holding and storing inventory, expressed as a percentage of inventory value.
Total Annual Carrying Cost
$95,000.00
Total Annual Carrying Cost vs Average Inventory Value
How to Calculate Inventory Carrying Cost
Formula
Carrying Cost = Storage + Insurance/Taxes + Shrinkage/Obsolescence + (Inventory Value x Opportunity Cost %) Carrying Cost % = Total Carrying Cost / Average Inventory Value x 100
Carrying cost is the hidden price of holding inventory. Beyond the obvious warehouse rent, it includes capital tied up that could earn returns elsewhere, products that expire or become obsolete, theft and damage, and insurance premiums. Typical carrying costs range from 20-35% of inventory value annually.
Example Calculation
A company holds $500,000 in average inventory with $30,000 storage, $10,000 insurance/taxes, $15,000 shrinkage, and 8% opportunity cost.
- 01Opportunity Cost = $500,000 x 8% = $40,000
- 02Total Carrying Cost = $30,000 + $10,000 + $15,000 + $40,000 = $95,000
- 03Carrying Cost % = ($95,000 / $500,000) x 100 = 19%
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