Which factor is commonly included in the calculation of carrying inventory costs?

The interest rate of money is a crucial component in the calculation of carrying inventory costs because it represents the opportunity cost of investing capital in inventory rather than in other potentially profitable ventures. When businesses hold inventory, they tie up financial resources that could otherwise be earning a return if invested elsewhere. Therefore, the interest rate reflects the cost of financing that capital. This makes it essential in understanding the total cost of holding inventory over time, which can impact pricing, profitability, and financial planning.

Other factors, while relevant for overall business costs, do not directly pertain to carrying inventory costs in the same way. Personnel costs refer to expenses related to staffing and labor, which may indirectly impact inventory management but are not part of the carrying cost itself. The cost of the product focuses on the initial purchase price rather than the costs associated with storing and managing that inventory over time. Order processing costs pertain to expenses incurred during the ordering process rather than the ongoing costs of maintaining inventory levels. Hence, the interest rate stands out as the most relevant factor for carrying inventory costs.