Dayton Hudson Corporation and Subsidiaries - Page 35

                                       - 35 -                                         
          concludes that respondent's method “contains a systematic bias              
          towards the understatement of losses during periods when sales              
          are increasing.”                                                            
                    4.  Sales Percentage Shrinkage Analyses                           
               To further examine the accuracy of Target's shrinkage                  
          method, Dr. Seago computed for each Target store during the                 
          taxable years ending in 1980 through 1989 (1) the verified                  
          shrinkage between physical inventory dates as a percentage of               
          sales for that period (actual shrinkage), (2) the shrinkage                 
          estimates accrued in book inventory as a percentage of sales for            
          the same period (estimated shrinkage), and (3) the difference               
          between (1) and (2).  Dr. Seago hypothesized that, if Target                
          could accurately predict shrinkage between physical inventory               
          dates, i.e., the difference between actual and estimated                    
          shrinkage is small, Target should likewise accurately predict               
          shrinkage for the taxable year.                                             
               Dr. Seago's calculations revealed that, over the period                
          examined, the simple average difference between actual and                  
          estimated shrinkage was 0.12 percent of sales and the weighted              
          average (weighted by sales) difference was 0.16 percent of sales.           
          That difference represents approximately 7 percent of actual                
          shrinkage.  In addition, Dr. Seago performed a regression                   
          analysis comparing sales and shrinkage for each Target store                








Page:  Previous  25  26  27  28  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  Next

Last modified: May 25, 2011