Carrying Cost Calculator
Calculate Carrying Cost step by step: capital cost + storage + insurance and taxes + obsolescence and shrinkage.
In short
Formula: Carrying cost = inventory value × cost of capital + storage + insurance/taxes + obsolescence/shrinkage. Rate = carrying cost ÷ inventory value.
What this calculator does
Calculate Carrying Cost step by step: capital cost + storage + insurance and taxes + obsolescence and shrinkage. Worked example, questions and limitations included.
Use it to turn Currency (symbol only, never converted), Average inventory value, Cost of capital, Storage and handling cost per year, and the other shown inputs into a checked result you can compare, copy, or rerun with different assumptions.
The page shows the formula, a numeric worked example, and the assumptions that affect this inventory calculation.
Inputs and what they mean
- Currency (symbol only, never converted)
- — choice value.
- Average inventory value
- — number value.
- Cost of capital
- — number value.
- Storage and handling cost per year
- — number value.
- Insurance and taxes per year
- — number value.
- Obsolescence, damage and shrinkage per year
- — number value.
How to use it
- Enter each value in the unit shown next to the box (use the unit converter first if your numbers are in other units).
- Check the breakdown to see every intermediate step.
- Read the limitations before relying on the result.
Formula
Cost components follow the ASCM (APICS) definition of carrying cost.
Each component is entered by you; no industry percentage is assumed.
The resulting rate × unit cost gives the holding cost H used in EOQ.
Carrying cost = inventory value × cost of capital + storage + insurance/taxes + obsolescence/shrinkage. Rate = carrying cost ÷ inventory value.
Inputs used: Currency (symbol only, never converted), Average inventory value, Cost of capital, Storage and handling cost per year, Insurance and taxes per year, Obsolescence, damage and shrinkage per year.
Worked example
Distribution stock
- Capital = 16,000.
- Total = 16,000 + 20,000 + 4,000 + 6,000 = $46,000.
- Rate = 23%.
Reading the result
The headline figure is the main answer. Any breakdown underneath shows the parts that make it up, so you can check the working and see what changes when you adjust an input.
Limitations and assumptions
- Annual figures only.
- Allocation of shared costs is your choice.
- Single average value.
- Results are planning estimates built only from the figures you enter. No prices, rates, demand patterns or service levels are built in, and the results are not supplier quotes or carrier rates.
- The result depends on the values you enter for this carrying cost calculator; it does not supply missing rates, rules, prices, dates, or assumptions for you.
Common questions
What cost of capital should I use?
Your finance team's figure — often the weighted average cost of capital or a hurdle rate. Check the formula, example, and limitations on this page before using the result for a real inventory decision.
Should rent be included?
Only storage costs that change with inventory level. Fixed rent you pay anyway is often excluded.
How do I use the rate in EOQ?
Multiply the rate by the unit cost to get holding cost per unit per year. Check the formula, example, and limitations on this page before using the result for a real inventory decision.
How do I use the Carrying Cost Calculator?
Enter the required values for Currency (symbol only, never converted), Average inventory value, Cost of capital, Storage and handling cost per year, Insurance and taxes per year, and the other fields shown. The calculator applies the formula on this page and shows the main result with any supporting breakdown so you can check the arithmetic.
What formula does the Carrying Cost Calculator use?
Carrying cost = inventory value × cost of capital + storage + insurance/taxes + obsolescence/shrinkage. Rate = carrying cost ÷ inventory value. The visible formula section above lists the calculation path and the edge cases the page handles, so the result can be checked without relying on the form alone.
Can the Carrying Cost Calculator be used for exact decisions?
Use it as a calculation aid, not as a substitute for checking the underlying rule, contract, policy, or professional advice that applies to your situation. When a result depends on local rules, personal details, prices, or dates, enter those values yourself and confirm them before acting.
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