Calculate shortage or overage percent, given the following information: Opening inventory
960 Gross purchases
9,780 Gross sales
12,219 Transfers out
15,290 Markdown cancellations
670 Closing physical inventory $77,700
The Correct Answer and Explanation is:
To calculate the shortage or overage percent, we follow these steps:
Step 1: Calculate Book Inventory (BI)
Book Inventory =
Opening Inventory
- Gross Purchases
- Transfers In
– Transfers Out
– RTV (Return to Vendor)
– Gross Sales - Customer Returns
– Markdowns - Markdown Cancellations
– Employee Discounts
Book Inventory=64,280+123,645+12,219−9,769−960−105,420+9,780−15,290+940−670=$78,755\begin{align*} \text{Book Inventory} &= 64,280 \\ &+ 123,645 \\ &+ 12,219 \\ &- 9,769 \\ &- 960 \\ &- 105,420 \\ &+ 9,780 \\ &- 15,290 \\ &+ 940 \\ &- 670 \\ &= \textbf{\$78,755} \end{align*}
Step 2: Compare to Physical Inventory
Closing Physical Inventory = $77,700 Shortage=78,755−77,700=$1,055\text{Shortage} = 78,755 – 77,700 = \textbf{\$1,055}
Step 3: Calculate Shortage Percent
Shortage Percent = (ShortageBook Inventory)×100=(1,05578,755)×100≈1.34%\left( \frac{\text{Shortage}}{\text{Book Inventory}} \right) \times 100 = \left( \frac{1,055}{78,755} \right) \times 100 \approx \boxed{1.34\%}
Final Answer: 1.34% shortage
Explanation
Inventory control is crucial in retail to track the difference between what is recorded (book inventory) and what physically exists (physical inventory). This difference is known as either shortage or overage. A shortage usually means inventory has been lost due to theft, damage, miscounting, or administrative errors. An overage suggests a counting or recording error where more inventory is found than expected.
To compute the inventory discrepancy percentage, we first calculate the book inventory, which is an adjusted figure based on changes to inventory over the period. We start with the opening inventory and add or subtract relevant transactions such as purchases, transfers, returns, markdowns, and sales. This gives us what the inventory should be if everything was tracked perfectly.
In the given data, the book inventory was calculated as $78,755, while the actual physical count at the end of the period showed only $77,700 in inventory. The difference of $1,055 is a shortage.
To understand the scale of the shortage, we convert it to a percentage by dividing the shortage by the book inventory and multiplying by 100. This results in a 1.34% shortage, which indicates a relatively small but notable discrepancy. Retailers use this percentage to monitor loss prevention effectiveness and tighten inventory control measures if the shortage exceeds acceptable limits.
