Clearly Canadian Beverage Corporation Inventories Analysis

Clearly Canadian Beverage Corporation

Inventories analysis

A. As a manufacturing company, Clearly Canadian Corporation, which produces and markets natural and flavored beverage products is expected to hold three kinds of inventories. These inventories are carried by Clearly Canadian in every phases (input, processing, output) in manufacturing the beverage.

Inventories that are held by this company are raw material inventories, working in process inventories, and finished goods inventories. As we know, Clearly Canadian is a beverage company, the raw materials that are needed to make the beverages are natural water, sugar, artificial coloring, etc.

While after all the raw materials have been collected, the company will face the processing phase, meaning converting the raw material into finished goods, example: mixing the ingredients. This phase is categorized as working in process inventories.

Last but not least, the raw materials that have been processed and ready to be sold in the markets are the finished goods inventories. These are the inventories that Clearly Canadian distributes and sells in United States, Japan, Thailand, Great Britain, etc

Conclusion, Clearly Canadian is holds this three inventories throughout the making and selling it’s beverage.

B After we define the Clearly Canadian inventories above, we know that those inventories are very important for Clearly Canadian, therefore they have to manage it properly. To hold an inventory a company is faced with risks, where it may face some losses too. The risks that clearly Canadian has to handle include storage costs, opportunity costs, peripheral costs, and depreciation costs.

For storage costs, the costs in this category are storage charges, storage staff, equipment maintenance, and running costs. Storage charges include rent expense, lighting, heating, refrigeration, air conditioning, etc (Lucey 1988, p.185). The company needs to pay this cost because by holding the inventories it will need storage facilities and supporting staff.

Opportunity costs will arise when the company does not choose the best alternative includes interest on capital invested in the stock (Lucey 1988, p.185). The company could have earned interest from the bank if they did not invest the money on these inventories.

Supporting costs, which are also call peripheral cost, comes together with the storage cost that comes along with the storage costs. Peripheral cost means the cost that additional cost. Examples Audit, stocktaking, insurance, and security costs.

Lastly, depreciation cost is the cost that incurred due to depreciation value of the inventories or maybe damages, which cause invaluable. Those kind of cost are deterioration, obsolescence, pilferage, and vermin damage (Lucey 1988, p.