Free Carrying Cost Calculator
Annual inventory holding cost formula
Break down your inventory carrying cost into storage, capital, insurance, obsolescence, and shrinkage components. Get annual, monthly, weekly, and per-unit holding costs instantly.
Carrying Cost Rate Components (%)
Per Unit Cost (optional)
Enter units in stock to calculate per-unit carrying cost
Total Rate = Storage + Capital + Insurance + Obsolescence + Shrinkage
Annual Carrying Cost = Inventory Value × Total Rate%
What Is an Inventory Carrying Cost Calculator?
An inventory carrying cost calculator computes the total annual cost of holding your inventory by combining five key cost components: storage/warehousing costs, capital/opportunity cost (what the money could earn elsewhere), insurance premiums, obsolescence risk (products becoming unsellable), and shrinkage (theft and damage). The result is your total carrying cost rate (%) and the annual, monthly, and weekly cash cost — critical inputs for EOQ calculations, pricing decisions, and profitability analysis.
How to Calculate Inventory Carrying Cost
Step 1 — Enter Average Inventory Value
Enter the average value of inventory you hold during the year. If your stock value fluctuates, use (beginning inventory + ending inventory) ÷ 2 as a simple estimate.
Step 2 — Set Each Cost Rate Component
Adjust the default rates for storage (5%), capital/opportunity cost (15%), insurance (1%), obsolescence (3%), and shrinkage (1%). Each rate is a percentage of your average inventory value per year.
Step 3 — Get Annual, Monthly, and Per-Unit Cost
The calculator shows your total carrying cost rate, annual cost, monthly cost, and weekly cost. Enter units in stock to also see the per-unit annual carrying cost — useful for pricing and EOQ calculations.
Who Uses This Carrying Cost Calculator?
Inventory Planners
Calculate the holding cost per unit to use in EOQ and reorder point models for accurate inventory optimisation.
Finance & Accounting Teams
Break down the full cost of carrying inventory on the balance sheet and report it accurately in management accounts.
Product Managers
Understand the true cost of holding slow-moving SKUs to make informed decisions about discontinuation or clearance.
Supply Chain Consultants
Benchmark client carrying cost rates against industry standards and identify the biggest cost reduction opportunities.
Frequently Asked Questions
What is inventory carrying cost?
Inventory carrying cost (also called holding cost) is the total annual cost of storing and maintaining your inventory. It includes warehouse storage, the opportunity cost of capital tied up in stock, insurance, the risk of obsolescence, and shrinkage from theft or damage.
What is a typical inventory carrying cost rate?
Most businesses carry inventory at 20–30% of inventory value per year. The largest component is usually capital/opportunity cost (15%), followed by storage (5%), obsolescence (3%), shrinkage (1%), and insurance (1%).
What is capital / opportunity cost of inventory?
When cash is tied up in inventory, it cannot be invested elsewhere. The opportunity cost is what that money could have earned — typically your cost of capital or expected return on investment. For most SMBs this is 10–20% per year.
How does carrying cost affect EOQ?
Economic Order Quantity (EOQ) uses holding cost per unit per year as a key input. A higher carrying cost rate makes it more expensive to hold large quantities, pushing the optimal order quantity lower (more frequent, smaller orders).
How is per-unit carrying cost calculated?
Per-Unit Annual Carrying Cost = Total Annual Carrying Cost ÷ Units in Stock. This is useful for product profitability analysis and for setting the holding cost input in EOQ calculations.
Is this carrying cost calculator free?
Yes, completely free with no account or login required.