What does "inventory carrying cost" include?

The term "inventory carrying cost" encompasses the total costs associated with holding inventory over a period of time. This includes several components: warehousing costs, which cover expenses related to storage facilities and the maintenance of inventory, such as rent, utilities, and security; opportunity costs, which reflect the potential earnings that could have been generated if capital tied up in inventory had been invested elsewhere; insurance costs for protecting the inventory; and depreciation costs if the inventory loses value over time.

Therefore, the comprehensive nature of inventory carrying costs makes the answer that identifies it as including various expenses, such as warehousing and opportunity costs, the most accurate. Understanding these components helps businesses manage their inventory more effectively and improve overall supply chain efficiency.