Question

Carrying costs are:

1) Cost of capital only

2) Cost of interest only

3) Cost of space, spoilage, theft, insurance

4) Cost to place the order

5) Lost sales costs

Answer 1

Carrying costs, also known as holding costs and inventory carrying costs, are the costs a business pays for holding inventory in stock. A business can incur a variety of carrying costs, including taxes, insurance, employee costs, depreciation, the cost of keeping items in storage, the cost of replacing perishable items, and opportunity costs. Even the cost of capital that helps to generate income for the business is a carrying cost.

Therefore, cost of space, spoilage, theft, insurance (Option 3)

Further, cost of capital is also includible in the carrying cost. But, in option 2 the word only has been used at the end, hence the accurate option is option 3.