Question

A recent physical inventory at a department store reports a merchandise value of $875,435. The merchandise book value was $907,340. The merchandise sales were $1,988,345. What is the shrinkage as a percentage of sales? (Shrinkage is the difference between the book value and the merchandise value from a physical inventory.)

Answer 1

The shrinkage as a percentage of sales is 1.6%.

Explanation:

In order to find the percentage of the sales that can be contributed to shrinkage, we first need to find the amount of shrinkage between the book value ($907,340) and the physical inventory ($875,435). The difference between these two values is $31,905. With this value of shrinkage, I then divide by the total amount in sales, which is $1,988,345. This would give me an overall percentage of 1.6%, which represents the shrinkage as a percentage of sales.