Inventory Carrying Cost Calculator
Total the cost of holding stock: capital, storage, insurance, shrinkage and obsolescence.
About Inventory Carrying Cost Calculator
Carrying cost is usually 20 to 30 per cent of inventory value a year once capital, space, insurance and obsolescence are all counted. That is why cutting stock releases far more than the working capital alone. Buyers optimise purchase price and ignore carrying cost, which is how a bulk discount of 5% ends up costing more than it saves.
Formula
Inventory Carrying Cost
Carrying cost = average inventory value × (capital + storage + insurance + obsolescence) %
- carrying rate
- Total annual cost of holding stock as a share of its value
Worked example
With the default values below, Inventory Carrying Cost Calculator returns Annual Carrying Cost of $55,000.00. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Average inventory valueminimum 0
- 250,000
- Cost of capitalaccepts 0–100 %
- 9 %
- Storage and handlingaccepts 0–100 %
- 6 %
- Insurance and taxesaccepts 0–100 %
- 2 %
- Shrinkage and obsolescenceaccepts 0–100 %
- 5 %
Results
- Annual Carrying Cost
- $55,000.00
- Total Carrying Rate
- 22.00%
- Monthly Carrying Cost
- $4,583.33
- Cost per Unit of Stock Value Held
- 0.2200
- Saving From Cutting Inventory 10%
- $5,500.00
Step by step
- 1Values used
- 2Inventory Carrying Cost
- 3Annual Carrying Cost= 55,000.00
- 4Total Carrying Rate= 22.00
- 5Monthly Carrying Cost= 4,583.33
- 6Cost per Unit of Stock Value Held= 0.2200
- 7Saving From Cutting Inventory 10%= 5,500.00
Assumptions and limits
- The result is derived only from the 5 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation or compounding frequency into account.
- Figures are rounded for display to 4 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
- This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
Frequently Asked Questions
How is Inventory Carrying Cost calculated?
Carrying cost = average inventory value × (capital + storage + insurance + obsolescence) % Carrying cost is usually 20 to 30 per cent of inventory value a year once capital, space, insurance and obsolescence are all counted. That is why cutting stock releases far more than the working capital alone.
Why does Inventory Carrying Cost matter?
Buyers optimise purchase price and ignore carrying cost, which is how a bulk discount of 5% ends up costing more than it saves.
What values do I need to enter?
This calculator takes 5 inputs: Average inventory value, Cost of capital, Storage and handling, Insurance and taxes, Shrinkage and obsolescence. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.