Video Game: Do Companies Pay a Carrying Cost for Inventory?
Short Answer
Yes — inventory does create costs in the simulation, but there is no single line called “carrying cost” in your financial statements. Instead, the cost of holding inventory is built into several existing expense lines.
Why You Don’t See a Line Called “Carrying Cost”
In real businesses, carrying costs are not shown as one item. They are made up of many smaller expenses, and these appear in different places on the financial statements.
The simulation follows the same logic.
Where Inventory Costs Actually Appear
These costs increase as your inventory grows:
| Part of Carrying Cost | Where You See It in the Simulation |
|---|---|
| Storage, utilities | General & Administrative – Rent |
| Staff who handle inventory | General & Administrative – Salaries and benefits |
| Insurance/taxes on inventory | General & Administrative – Other expenses |
| Interest if you borrow to finance inventory | Financial Expense – Interest on credit line |
| Item | Where You See It |
|---|---|
| Inventory | Short-Term Assets → Finished Goods Inventory |
So Why Doesn’t Stockpiling Inventory Hurt Performance More?
It can — but not always immediately.
If you buy too many units early in the simulation and demand doesn’t keep up:
-
Your cash is tied up in inventory
-
You risk lower profitability if your inventory becomes old or unsellable
Other companies may outperform you simply because they managed their stock more efficiently.
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