Inventory Carrying Cost Calculator

Break down what it actually costs to hold your inventory for a year: capital, storage, shrinkage, insurance and obsolescence.

Your numbers

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Inventory value

Average inventory value (at cost)

Cost categories (% of inventory value per year)

Cost of capital

What that money would otherwise earn or cost you to borrow.

Storage and warehousing

Rent, utilities, racking and handling labor for space this inventory occupies.

Shrinkage and damage

Insurance and taxes on inventory

Obsolescence and markdowns

Value lost writing off or marking down stock that didn't sell in time.

Your result · updates as you type

Inventory carrying cost per year

$22,800

19% of your $120,000 average inventory value, across capital, storage, shrinkage, insurance and obsolescence.

Carrying cost, % of inventory value: 19%
Carrying cost per month: $1,900
Largest category: Cost of capital

These five categories are the usual building blocks of carrying cost, and a total of 20–30% of inventory value a year is a commonly used starting point. Replace each row with your own numbers rather than relying on that range, and feed the total % into the EOQ calculator's holding cost field.

Carrying cost by category

Cost of capital

$9,600

Storage and warehousing

$4,800

Shrinkage and damage

$2,400

Insurance and taxes

$2,400

Obsolescence and markdowns

$3,600

Breakdown

Cost of capital (8%): $9,600
Storage and warehousing (4%): $4,800
Shrinkage and damage (2%): $2,400
Insurance and taxes (2%): $2,400
Obsolescence and markdowns (3%): $3,600
Total carrying cost per year: $22,800

What goes into carrying cost

Carrying (or holding) cost is usually grouped into five categories. Most stores never add them up individually, and end up either ignoring holding cost or borrowing a generic percentage that doesn't fit their business.

Category	What it covers
Cost of capital	What the cash tied up in stock would otherwise earn, or cost you to borrow
Storage & warehousing	Rent, utilities, racking and handling labor for the space the stock occupies
Shrinkage & damage	Theft, loss and breakage
Insurance & taxes	Coverage and any inventory-related tax on the stock itself
Obsolescence	Value lost writing off or marking down stock that didn't sell in time

Example: the default numbers

Average inventory value: $120,000
Capital 8% + storage 4% + shrinkage 2% + insurance/tax 2% + obsolescence 3%: 19% total

Carrying cost = $120,000 × 19% = $22,800 a year, about $1,900 a month.

Using the total

Feed it into EOQ. Use the total % as the holding cost input on the EOQ calculator instead of a generic guess.
Compare categories. A product with high shrinkage or fast obsolescence (fashion, electronics) needs a higher %; a stable staple product needs less.
Rules of thumb put the total at 20–30% of inventory value a year, but build your own from your real numbers rather than borrowing that range outright.

Questions people ask

What is inventory carrying cost?

The total yearly cost of holding stock: the capital tied up, plus storage, shrinkage, insurance and obsolescence, usually expressed as a % of inventory value.

What's a typical carrying cost percentage?

20–30% of inventory value a year is a commonly used starting range, but it varies a lot by category and business. Build your own figure category by category rather than relying on a single number.

Why does cost of capital count as a carrying cost?

Money spent on inventory can't earn interest, pay down debt, or fund something else, so it has a real opportunity cost even without a separate storage bill.

How do I use this with EOQ?

Enter the total percentage this calculator gives you as the 'annual holding cost' input on the EOQ calculator.

Last reviewed 30 September 2026.