Which costs are included in a business's inventory carrying cost percentage?

The inventory carrying cost percentage encompasses a range of costs that reflect the financial burden of holding inventory. This includes expenses related to storage, depreciation, obsolescence, and the costs associated with financing the inventory.

In this context, equipment leases represent the cost of renting or leasing the physical space used for storing inventory. Financing charges relate to the interest costs incurred when borrowing to purchase inventory. Taxes also contribute to the carrying cost as they can apply to the inventory held by a business, potentially affecting its overall cost structure.

While shipping and handling costs (mentioned in option A) are crucial in the logistics process, they are more accurately classified as transaction costs rather than carrying costs, which are related to holding inventory over time. Marketing and sales expenses (option C) are tied to promoting products rather than the costs associated with inventory itself. Lastly, production and labor costs (option D) would not fall under carrying costs, as they are associated with the creation of goods rather than the costs incurred while holding finished goods in inventory.

Thus, the correct selection reflects the components that directly contribute to the financial implications of maintaining inventory over a designated period.