Measuring Marketing

Chapter 83 Percent Inventory Carrying Costs

Measurement Need

To determine the percentage of net sales attributed to the carrying costs of managing the unsold inventory.

Solutioni

Percent inventory carrying costs (PICC) is calculated with the following formula:

$PICC=\frac{I_{cc}}{S_{nt}}\times 100$

Where

PICC = percent inventory carrying costs

Icct = inventory carrying costs in time period t

Snt = net $ sales in time period t

If your company is a computer retailer with net sales of $1,000,000 during the month, and your inventory carrying costs were $300,000, then your PICC is 30%:

$\begin{array}{l}PICC=\frac{\$300,000}{\$1,000,000}\times 100\\ =30\%\end{array}$

Certainly, the lower the PICC, the better your financial bottom line, since carrying costs eat into ...