Where this calculation fits
Once the inventory shrinkage cutoff is fixed, compare recorded inventory with physical inventory and value the shortage at cost and retail amounts. Its supporting rows help distinguish a real operating change from a change in classification.
In a reconciled inventory shrinkage result, open the Inventory Turnover Calculator only when inventory turnover belongs to the same operating review.
For the selected inventory shrinkage period, save the raw evidence beside the calculation so another reviewer can reproduce the result without guessing.
Match the entries to one period
Inventory control evidence: Book inventory units should come directly from the inventory control evidence. Preserve unrounded book inventory units from the source. Compare Book inventory units with Physical count units; align the Book inventory units cutoff first.
Inventory control evidence: Preserve the Physical count units source column. Date its Physical count units extraction. Confirm partial-period treatment for physical count units before comparison. Let the formula relate Physical count units and Average cost per unit; avoid a manual offset.
Inventory control evidence: Enter Average cost per unit only after the inventory control manager confirms its scope. Confirm partial-period treatment for average cost per unit before comparison. Make every status difference between Average cost per unit and Average retail value per unit visible.
Inventory control evidence: Map Average retail value per unit to one controlled record; cite Average retail value per unit in the working file. Trace average retail value per unit to its controlling register. A missing Average retail value per unit source cannot be back-solved from Known write-offs already recorded.
Inventory control evidence: Treat Known write-offs already recorded as separate evidence; never use Known write-offs already recorded as a balancing amount. Do not replace missing known write-offs already recorded with a target. Do not net Known write-offs already recorded with Book inventory units unless the equation does.
How the components combine
For the selected inventory shrinkage period, the Stockout Cost Calculator keeps stockout cost auditable instead of burying it in a side calculation.
Against the recorded inventory shrinkage population, calculate with the unrounded entries using: Shrinkage units equal book units minus physical units; shrinkage rate divides that shortage by book units. Display precision should not feed back into a later run.
Unexpected movement should be tied first to Book inventory units, Known write-offs already recorded, or the population before a business cause is proposed.
What deserves investigation next
A threshold for inventory shrinkage should come from an approved plan, contract, capacity study, or historical comparison rather than from the calculator.
In the inventory shrinkage working file, an unexplained variance should stay open in the working file rather than being filled with an unsupported narrative.
A useful inventory shrinkage review closes with the unresolved questions, responsible teams, and source updates still required.
In a reconciled inventory shrinkage result, related analysis should inherit the same reporting cutoff when the two results will be compared.
Preserve a reproducible calculation
The review trail for inventory shrinkage supports this point: before circulation, confirm that reviewers understand what is excluded. inventory shrinkage leaves inventory obsolescence unresolved beside Book inventory units. Evidence beyond Book inventory units is required. Conclusions about Known write-offs already recorded remain separate from inventory shrinkage. The model relates Book inventory units to Known write-offs already recorded; future events affecting inventory shrinkage are not predicted.
The evidence status of inventory shrinkage matters because compare the saved headline with its intermediate rows after any code, spreadsheet, or definition update.
For a dated inventory shrinkage analysis, a documented Inventory Reorder Point Calculator can challenge the interpretation through a separate inventory reorder point measure.
Walk through the default scenario
The example dataset is Book inventory units = 42500 units; Physical count units = 41350 units; Average cost per unit = $16.50; Average retail value per unit = $31; Known write-offs already recorded = 180 units. Change one field at a time when testing sensitivity, then save the chosen operating scenario separately.
A repeatable inventory shrinkage process assumes that compare customized cases only after confirming they use the same period length and population boundary.
Clarifications for this calculation
How long should evidence be retained?
The source case for inventory shrinkage shows that keep it through the applicable operating, financial, contractual, or audit review cycle.
What makes two cases comparable?
Within the documented inventory shrinkage case, they need aligned definitions, populations, periods, units, and evidence status.
Can exclusions be changed between periods?
Before circulating inventory shrinkage, only with disclosure and, where material, a restated comparison under one definition.
Why save the purpose of the analysis?
A saved inventory shrinkage scenario makes clear that purpose determines the relevant population, materiality, and follow-up question.