shortage

Examples of shortage in the following topics:

• Methods in Retail Inventory

  • Note that both the gross margin and the retail inventory methods can help you detect inventory shortages.
  • To illustrate how you can determine inventory shortages using the retail method, assume that a physical inventory taken at year end, showed only $62,000 of retail-priced goods in the store.
  • Assume that use of the retail method for the fourth quarter showed that $66,000 of goods should be on hand, thus indicating a $4000 inventory shortage at retail.
  • After converting the $4000 to $2400 of cost ($$4,000 \cdot 0.60$) you would report this as a "Loss from inventory shortage" in the income statement.
  • Knowledge of such shortages may lead management to reduce or prevent them, by increasing security or improving the training of employees.

• Inventory Turnover Ratio

  • However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or expected market shortages.
  • This often can result in stock shortages.

• Importance of Cash Flow Accounting

  • A company can fail because of a shortage of cash even when it is profitable.

• Working Capital Management Analysis

  • If money grew on trees, companies would never have a working capital shortage.

• Categories of Goods Included in Inventory

  • A queue leading to a production step shows that the step is well buffered for shortage in supplies from preceding steps, but may also indicate insufficient capacity to process the output from these preceding steps.