Certified Management Accountant 2026 – 400 Free Practice Questions to Pass the Exam

To determine the carrying cost per item, it is essential to focus on the per item carrying costs percentage. Carrying costs, also known as holding costs, include storage, insurance, depreciation, and opportunity costs for holding inventory.

The carrying cost percentage is typically expressed as a percentage of the inventory value, reflecting all costs associated with holding a unit of inventory for a given period. By understanding this percentage and knowing the value of the inventory item, you can accurately calculate the carrying cost for each item.

This calculation is crucial for inventory management, as it helps businesses make informed decisions about stocking levels, pricing strategies, and overall financial planning. Knowing these costs can lead to improved profitability by minimizing excess inventory and optimizing order quantities.