44 BULLETIN 1044, U. S. DEPAETMEiSTT OE AGKICULTUEE. 



Price declines, mark downs for advertising purposes, spoilage, 

 evaporation, overweight, waste, thievery, and net shortage owing 

 to cashier's errors together constitute what may be called "shrink- 

 age." In the case of department stores or chain stores it may also 

 be necessary to consider transfer to other departments or other 

 stores. 



In determining the average percentage of mark up necessary 

 shrinkage must be considered in addition to the average percentage 

 of expense burden. 



Because of the many diversified lines in the grocery business and 

 the small size of the usual sale it is not practicable to keep account 

 of shrinkage by perpetual inventory methods, but it is practicable 

 by means of a stock-control operation to determine the shrinkage 

 for a representative period, and this will enable the manager to esti- 

 mate the shrinkage over a longer time. 



If the inventory of stock at the end of the period during whic^ the 

 stock-control operation is carried on is subtracted from the sum of 

 the inventory at the beginning, plus purchases, all three items at 

 retail valuations, the result is the retail value of all goods disposed of 

 during the period. The subtraction from this figure of total sales 

 will give the total shrinkage from all sources during the period. 

 Making separate records of retail price declines, of mark downs for 

 advertising purposes, of mark downs for spoilage, and of transfers, 

 these classes of shrinkage can be accurately determined. Mark ups 

 can also be recorded. If the classes of shrinkage mentioned are sub- 

 tracted from total shrinkage, the corrected retail value of goods sold 

 will be ascertained. When net sales are subtracted the balance will 

 be miscellaneous shrinkage, which is made up of evaporation, over- 

 weight, waste, thievery, and shortage, if any, owing to cashier's 

 errors. The details of this operation will be discussed further. Form 

 6 summarizes the procedure. 



If the stock control is kept by classes of goods, such as fresh fruits 

 and vegetables, dairy products, cured meats, and other groceries, the 

 shrinkage from each source and the total can be accurately deter- 

 mined for each class of goods handled. In the same way shrinkage 

 can be determined on individual items if desired. 



Under present competitive conditions it may not always be pos- 

 sible for a merchant to add the exact mark up on each item that 

 would be necessary to cover the exact cost of handling that par- 

 ticular article. But if a merchant knows exactlj^ where his losses 

 occur on one article, and how much, he is in a much better position 

 to so manage his business that these losses will be reduced to a 

 minimum. 



In arriving at the retail value of purchases for the period, only that 

 stock should be considered which is actually added during the period, 



