Video Game: Do Companies Pay a Carrying Cost for Inventory?

This article is intended for students and instructors.

This article applies to Praxar's Video game simulation.

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

1. Income Statement (where most costs show up)

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

These are real costs your company pays, even if they are not grouped under “carrying cost.”

2. Balance Sheet (where the inventory sits)

Item	Where You See It
Inventory	Short-Term Assets → Finished Goods Inventory

Having a large inventory increases the value of this asset but may also increase the costs listed above.

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.