Carrying Costs include which items?

• A. Costs associated with storage, handling, and insurance
• B. Price the pharmacy pays for the product
• C. Costs of purchasing
• D. Costs of stockouts

Answer: (A)

Carrying costs are the ongoing costs of keeping inventory on hand. They accrue while stock sits in storage and includes the expenses to store and move items as well as protections like insurance. The option that lists storage, handling, and insurance reflects these ongoing holding costs. The price paid for the product and other purchasing costs are upfront procurement costs, not carrying costs. Stockouts represent shortage costs that occur when inventory is insufficient, not costs of holding stock. So the items that truly constitute carrying costs are storage, handling, and insurance.