Carrying cost
Encyclopedia of Business Terms and Methods, ISBN 978-1- 929500-10-9. Copyright © 2012 by Marty J.Schmidt. Re14sed 29 January 2012.
The Meaning of Carrying Cost
Carrying cost is the cost of maintaining, and holding inventory. Warehouse, insurance costs, financing costs, pilferage, obsolescence, and spoilage are the major components of this cost.
In business case analysis, carrying costs could be entered as non-capital expenses on scenario cash flow statements. On the other hand, carrying cost savings or costs avoided could be entered directly on an incremental cash flow statement as benefits/gains. For more on the treatment of costs, cost savings, avoided costs, and cash flow in the business case, see Business Case Essentials.
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