44 BULLETIN 1044, U. S, DEPARTMENT OF AGRICULTURE. 
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 which 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 thi& 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 exactly 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, 
