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90,000 of average stock at 25 percent
Inventory starts at 80,000 and ends at 100,000, both at cost. The carrying rate in the box is 25 percent. That rate is an example. ISM says there is no consensus benchmark.
Beginning inventory: 25% lower
Change beginning inventory to 60,000 while keeping the other example values the same.
Beginning inventory: 25% higher
Change beginning inventory to 100,000 while keeping the other example values the same.
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Quick answer
What does the Inventory carrying cost calculate?
What does it cost to hold this inventory for a year? This calculator uses beginning inventory, ending inventory, and carrying rate to estimate cost of holding the average stock immediately in your browser.
With the values currently entered, the result is $22,500.00 — carrying cost for the year. It also shows average inventory, monthly carrying cost, and carrying rate.
How to use the Inventory carrying cost
- Replace the example values with your own numbers.
- Review the result and supporting figures as they update automatically.
- Check the formula and assumptions before using the estimate for a decision.
Inputs used
- Beginning inventory
- Ending inventory
- Carrying rate — entered in %
Inventory carrying cost formula
Average inventory = (beginning + ending) ÷ 2. Annual carrying cost = average inventory × the carrying rate you type.
Assumptions
- An SEC computation of ratios exhibit writes average inventory as beginning plus ending, divided by two. This page uses that average, then multiplies by the carrying rate you type.
- ISM describes carrying cost as capital, service, risk, and storage and handling, and says there is no consensus benchmark. The 25 percent in the box is an example rate, not an ISM figure.
Verify the inputs
Authoritative sources
These sources explain the definitions, factors, or rules behind this tool. Their geographic scope is shown because an official source for one country is not automatically valid somewhere else.
Describes inventory carrying cost as capital, service, risk, and storage and handling, and says there is no consensus benchmark. This page multiplies average inventory by the rate you type.
Computation of ratiosUS Securities and Exchange CommissionScope: SEC-filed ratio definitions; method is generalWrites the current ratio as current assets divided by current liabilities, and inventory turnover as total cost of sales divided by average inventory (beginning plus ending, divided by two).
Sources do not endorse Calculum. Check the source date, scope, and your own documents before making a financial, tax, insurance, or reporting decision.
Practical guide
Inventory carrying cost example and edge cases
Inventory carrying cost is what you spend to hold stock. ISM describes that cost as capital, service, risk, and storage. This page averages beginning and ending inventory the way the SEC averages it, then multiplies by the rate you type.
Example: 90,000 of average stock at 25 percent
Inventory starts at 80,000 and ends at 100,000, both at cost. The carrying rate in the box is 25 percent. That rate is an example. ISM says there is no consensus benchmark.
- Beginning inventory
- 80,000
- Ending inventory
- 100,000
- Carrying rate
- 25 %
Calculated result$22,500.00carrying cost for the year
Average inventory is 90,000. At 25 percent, a year of carrying cost is 22,500, or 1,875 a month. Type the rate that matches the costs you include.
Example results use the default display profile. The calculator above follows your selected country and units.
How to read the result
- Read the annual cost first. Then check the average it came from. A higher ending balance raises the average even when the rate stays at 25 percent.
- ISM lists capital, insurance and taxes, damage and obsolescence, and storage. Leave a cost out of your rate and the 22,500 gets smaller. You choose the rate.
Edge cases worth checking
The ending inventory is a retail price
The SEC average wants inventory on the cost basis you use for turnover. A retail price in the ending box makes the average, and the carrying cost, too high.
Work in process never hits these balances
ISM’s glossary defines work in process as semi-finished goods at some point in production. Add that balance if you want it in the carrying cost. These two boxes only average what you type.
What changes the result most
Beginning inventory
Use a current amount for beginning inventory. Include fees or recurring costs that belong in the same figure.
Ending inventory
Use a current amount for ending inventory. Include fees or recurring costs that belong in the same figure.
Carrying rate
Test a lower and higher carrying rate. A small percentage change can move the final result more than expected.
Try a different scenario
Small changes show whether the answer is stable or sensitive.
Beginning inventory: 25% lower
60,000$20,000.00carrying cost for the year
Beginning inventory: 25% higher
100,000$25,000.00carrying cost for the year
Ending inventory: 25% higher
125,000$25,625.00carrying cost for the year
Common mistakes
Check beginning inventory
An SEC computation of ratios exhibit writes average inventory as beginning plus ending, divided by two. This page uses that average, then multiplies by the carrying rate you type. Make sure this matches the number you enter.
Keep carrying rate consistent
ISM describes carrying cost as capital, service, risk, and storage and handling, and says there is no consensus benchmark. The 25 percent in the box is an example rate, not an ISM figure. Use the same units and time period throughout the calculation.
Do not rely on one inventory carrying cost scenario
Run a cautious case and an optimistic case. The range is often more useful than one exact-looking number.
Use this result well
What does it cost to hold this inventory for a year?
It does not replace a quote, contract, accountant, or local employment guidance.