He carrying cost for inventory consists of capital cost, obsolescence cost, and ordering cost components.
Cost, as used in everyday speech, refers to the monetary worth of the items and services that producers and customers buy. Cost can be thought of in terms of basic economics as a measurement of the opportunities that were given up when one good was chosen. Usually referred to as opportunity cost, this fundamental cost is necessary. The opportunity cost of buying a new household appliance for someone on a fixed budget could be, for instance, the cost of a trip that was not taken.
The link between the price of manufacturing inputs and the volume of output is more commonly understood to be the basis for cost. Total cost is the sum of all expenses paid to achieve a certain level of output; when this total cost is divided by the quantity produced, average or unit cost is found.
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