inventory cost

Definition

Costs associated with the maintenance of inventory. Inventory cost may include shrinkage, insurance, storage fees, taxes, and depreciation, and is typically estimated as a percentage of the total value of the inventory. A business must balance inventory cost against the risk of not being able to fulfill customer requests in a timely manner.

Use inventory cost in a sentence

You need to make sure that you have accurately predicted your inventory cost so that you have enough budget for it.

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The inventory cost of keeping so many RVs on the lot was beginning to increase as they had to take increased security measures to prevent theft.

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Although Juan's company had a low overhead, their inventory cost was high since all their produce required refrigerated storage units as well as pesticides.

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lower of cost or market (LCM) UNICAP Rules