The Ithaca Gas Company has a problem arising from the seasonal nature of its product. People use more gas in the winter to heat their homes and to cook. This creates the problem of peak loads. The problem is made even more difficult by the fact that there are five or six exceptionally cold days each winter, during which time the demand for gas increases tremendously. Rather than build pipelines for the peak loads, the daily fluctuations are handled by the use of gas tanks. The peak loads created by seasonal demands have been somewhat solved by the use of underground storage. Gas is pumped underground under pressure during the summer and then used in the winter. Of the $10,000,000 worth of gas pumped underground during the first year of operating the underground storage, it is estimated that $7,000,000 will never be recovered (this amount of gas is required to build up the pressure so that gas may be taken out).

Should the $7,000,000 be treated as inventory? Does a manufacturing firm have a similar problem?