Answer (D) is correct . Carrying costs are incurred to hold inventory. Examples include such costs as warehousing, insurance, the cost of capital invested in inventories, inventory taxes, and the cost of obsolescence and spoilage. Neither shipping costs nor the initial cost of the inventory are carrying costs.
Answer (A) is incorrect because Insurance is a cost of carrying inventory.
Answer (B) is incorrect because Invested capital is a cost of carrying inventory.
Answer (C) is incorrect because Obsolescence is a cost of carrying inventory.
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