Using the Following Information, What Amount of "Shrinkage" Would Be

question 85

Multiple Choice

Using the following information, what amount of "shrinkage" would be identified under the periodic inventory system? $\begin{array}{|l|r}\text { Inventory at the beginning of the year } & \$ 300,000 \\\hline \text { Inventory based on count at the end of the year } & \$ 650,000 \\\hline \text { Inventory purchases during the year } & \$ 1,000,000\end{array}$

• A)$ 0
• B)$300,000
• C)$650,000
• D)$700,000

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Definitions:

Operating Expenses

Costs associated with the day-to-day functions of a business, excluding cost of goods sold.

Machine-Hours

A measure of production time used, indicating the number of hours machines are operated in the manufacturing process.

Maintenance Costs

Expenses associated with the routine care and preservation of assets to keep them in operational condition.

Variable Operating Expense

Expenses that fluctuate in proportion to the amount of production or the volume of sales.