MANAGEMENT

Detailed explanation-1: -Inventory carrying cost is the cost the sum of expenses for handling or storing any unsold goods. These costs incorporate warehousing, labor, insurance, rent, combined with the value of damaged, expired, or out-of-date products.

Detailed explanation-2: -Carrying cost includes the cost of renting the warehouse where the stock is kept, operating the warehouse, paying the salaries of the employees working at the warehouse, any loss of inventory due to theft and damage, and insuring the inventory.

Detailed explanation-3: -Insurance on unsold products is also a type of carrying cost, as is the opportunity cost of the value of the inventory that hasn’t sold yet. Determining your company’s carrying costs is necessary for calculating the EOQ using the ordering cost formula.

Detailed explanation-4: -Storage cost is not included in the cost of inventory.