Certified in Logistics, Transportation and Distribution (CLTD) 2025 – 400 Free Practice Questions to Pass the Exam

The type of carrying cost associated with insurance and inventory management is best categorized as service costs. Service costs refer to various expenses incurred to maintain and manage inventory, which includes insurance premiums that protect the value of the inventory against loss or damage. Additionally, service costs encompass any costs tied to maintaining the conditions necessary for inventory to remain functional and available for use, such as security and inspections.

Understanding this type of cost is critical for effective inventory management, as it directly impacts the overall cost of holding inventory. While capital costs are more focused on the investment value tied up in inventory, risk costs relate specifically to potential losses from inventory shrinkage or obsolescence. Operational costs cover the general expenses associated with carrying out logistics and pulling together resources, which is broader than the specific aspects of insurance and inventory management. However, service costs precisely align with the intention of how inventory is safeguarded and sustained financially.