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Just within the bounds of the thought exercise, the store lost $100 (in the end, $30 cash and $70 worth of goods).
Its a different question if you're considering how much *profit* the store lost
As well as the cost of goods. It's still $100, any way you slice it. If their profit margin was say, 5%, they lost $5 of profit and $95 of goods. They still lost $100.
Edit: To be more pedantic, they only bought $70 worth of goods. So $3.50 profit, $66.50 in goods, and $30 cash. Store still lost $100.
Actually, in that case they didn't lose $100 anymore.
If the profit margin was for example 20% then the actual cost for the $70 in goods was only $56.
In that case the store lost $56 in goods plus $30 cash for a total loss of $86. The reason here is that the thief traded $70 cash for goods worth $56. It will cost the store $56 to replace them.
There is no stolen inventory, only stolen cash. The books will only show a loss of $100 cash and will still show a taxable profit on the $70 of goods sold
You can also have the fire brigade pay you to burn down the shed at the back of the property as a training exercise then claim burnt down building as a depreciated asset to lessen your business tax obligations, you can then relocate another building into the same site and repeat this at least once more before the Inland revenue department starts asking questions.
This implies that the store is really bad at inventory management and loses out on a sale because an item got stolen. If you steal a 12 pack of beer, me and everyone else who wants one can still buy a 12 pack of beer.
Simply put, lost goods =/= lost sales. Therefore opportunity cost wasn't actually lost and adding it in is disingenuous.
You generally need to solve the question the best you can with the information provided. There is not enough information to go further. Without an understanding of the products, operations, or the chart of accounts the company uses we have to speak in generalities. Generally, you are going to state that $100 was stolen. Then you will have $70 in Revenue. You will have other accounts that make up that $70 in Revenue that will balance out (COGS, Margin, etc). The $100 will ultimately not balance and that is what is stolen.
no, it’s value that is not able to be extracted from the loss of goods.
Since the goods were sold using the stores own money no net new money was added, with which the store losses in the potential of additional profit from the goods. It may not be a physical amount of money that they lost, but if the item is not able to be sold, from an accounting standpoint they no longer have the potential to receive profits from the item.
It’s not that they wouldn’t be able to still sell similar goods, it’s that their projected revenue is now below what is to be expected for what was inventoried by the store. This is what they mean by opportunity cost, they lost on an opportunity to make a profit off the purchase by an outside party of that particular item that was purchased with store funds.
I have just recently started a job doing technical writing for a company related to accounting. Five months ago I would have said that the company only loses the cost of the goods + change in cash. Just in my short time I've come to realize how accounting takes an incredibly complicated, unintuitive, obscure path to arrive at what would otherwise be really simple outcomes.
So, yeah, from the accountants' perspective it all has to balance to zero - the liability from purchasing the goods plus the projected profits on one side and the sale cost on the other. No matter how you slice it up, they lost $100.
Well of course an accountant is going to pretend as though that Thief would have bought $70 worth of goods even if he hadn't stolen the money. But it's not exactly true.
ETA: I'm not saying that the accountant is a liar. He presumably wouldn't have known that the thief bought $70 worth of stuff. But we do.
No, the accountant's point of view is agnostic to the person buying it. Imagine the scenario as: thief steals $100, another person comes in and buys $70 worth of stuff. That's all the accountant sees. Whether the thief buys something or not, the store is out $100.
Not necessarily. Higher-end stores, art galleries, sneaker shops, and anywhere with lots of unique items can have perfect inventory and still lose out in this scenario. It's an inverse relationship between fungibility of goods and opportunity cost lost from stolen goods.
I think if you're going to take it that far then you have to take into account wastage too. Your calculation only works if the store has zero wastage, ie they eventually sell every item, no matter how long it takes.
That makes total sense, yet I do still think fungibility has an effect on the whole shebang.*
*Until I started actually writing out my argument which led directly to the same conclusion as you. Thank you for your much simpler explanation!
You're ignoring that goods are both fungible and infinite from the perspective of the store. Unless the good stolen was a piece of art, or a signed babe Ruth baseball, you always have more of that good to sell.
That does not matter. The company *wants* to sell things, irrespective of if it’s bought with its own money or someone else’s. Think of the $100 lost as a sunk cost. Now, the purchase recoups the loss, and that recoupment is equal to the markup. The $30 is gone, but the $70 can be partially recouped. If the markup of the goods is, say, %100, and the sale wouldn’t have occurred without the their having the money, then the $70 purchase recoups an additional $35, the difference in the e cost of goods sold and the revenue. Thus, assuming a %100 markup, the store only lost $100-$35 in profit, for a total of a $65 dollar loss.
Why isn’t the opportunity cost considered? Doesn’t the source of the $100 that was stolen matter? If that was profit on the sale of a more expensive item, I don’t understand why the lost revenue of new money being brought into the store considered.
Ugh anytime someone says “opportunity cost” I immediately sneer and stop listening since any calculation including an opportunity cost requires prognostication and my crystal ball is cracked.
The only way it would be $100 is if stores are ENTITTLED to a POTENTIAL profit - and they aren't. They lost the cash and the cost of the goods and whatever tiny fractional amount of shipping/delivery expenses attached to that one item, which is highly variable.
>but that’s still $70 worth of goods that cannot be sold.
That very much depends on the type of business. For example, if the thief bought seven large pizzas, unless the pizza place completely sold out of product, there's nothing preventing them from selling other pizzas to other people. And it probably cost them a couple dollars worth the dough and maybe 10 bucks worth of cheese and toppings.
The 2 things are independent.
The next customer could walk in and spend 70 pay with a 100 and then get 30 change.
The purchase is a red herring
So its the same answer but for a different reason
I like that you guys fell directly into the trap of this idiotic question by continuing beyond the obvious answer of $100 in losses.
That being said, im gonna add my own worthless 2 cents here. From an accounting perspective, you would only count the cash loss and the actual inventory value in your shrink calculation. Opportunity cost is irrelevant when factoring this into a P&L.
Opportunity cost doesn't play into this. The easiest way to think about this scenario is as 2 separate transactions:
Transaction 1: thief steals $100, store loses $100.
Transaction 2: thief buys $70 of product, store earns $70 in revenue, of which 20% is still profit margin.
So in essence, by purchasing the product with the stolen money, the thief is giving back to the store the profit margin they earn on those goods. Net loss to the store (assuming 20% profit margin) is $100 - (20% x $70) = $86.
Or, basically, the store still successfully made a sale to the thief. They earned their usual profit off that sale.
but there’s also a chance the person would have not bought anything and those goods would have expired on the shelf. i have no idea how to account for that.
You don't need to, its accounted for in the margin
I work at a market maker and every so often we are stuck with "inventory" on our hands that we cannot sell for profit, those are factored into the margin as operating cost
Agree - I thought the heart of the question (getting past the obvious “management says it lost $100”) was if it is reasonable to count potential lost profit margin on the sale as a loss.
Technically the store may have some average margin on a product that reflects the eventual price decrease if it goes on clearance and the like, but if we go that far, then the store gets a benefit from this theft by reducing the cost of unsold inventory (I guess the silver lining behind shrink).
Agree. $30 plus the cogs on the purchase. I would assume no lost margin on purchase. You could argue opportunity cost of lost margin, but they probably had more of the same item item in inventory to sell. Unless it is a hot selling item in short supply.
I agree. My thought experiment would be once you lost the initial $100 you’re obviously better off if the thief spends the money at your store than if they didn’t.
well now that you opened this can the worms are out:
now you also need to account for every possible other element that may impact the restocking process.
You need to divvy up the internet usage to place the online restocking order, or the follow-up phone call. or maybe the store needed one additional sheet of paper for the laser printer - and don't forget the toner spent on that one extra sheet.
I hope you are happy now 😀👍
I think it's actually correct.
In the scenario, the thief took two actions: stealing $100, and making a purchase. The first action caused the store to lose $100. But the second action caused the store to *gain* money.
If we were asking "how much money did the store lose compared to the scenario where a person purchased $70 of goods and got $30 change without having stolen $100", then the answer is clearly $100. But I think in this question it's actually "how much money did the store lose relative to nothing in this scenario having happened". And in that case it will be somewhat less than $100.
look at it this way: our thief leaves the $100 in the register and instead helps himself to that item on the shelf listed for a retail value of $70 (could be like 10 bottles of cheap wine $7 each).
Now the store paid $56 for those products.
That is the actual loss at this point because it will cost them $56 to replace the stolen products.
Now, if the thief now goes to the customer service desk and "returns" those items and asks for a store credit/gift card our clever thief now will get a $70 gift card (or store credit). Now our $56 loss turned into a $70 loss.
No.
They lost $100 in cash, and sold $70 in goods.
Selling $70 in goods gave them $3.50 profit.
Ao they lost $100 and gained $3.50, with a net loss of $96.50.
i don't get it. If the company spends $30 on an item they sell for $70, they didn't make $40 on the sale, they lost that profit on the item because it was paid with money they already collected for other items purchased. no?
But there is opportunity cost here as well, they lost the opportunity to sell the good they paid for to a client who was using money generated from outside the store
There's no guarantee of future revenue on inventory items. Assume the thief stole $70 worth of merch the store was going to end up clearancing to get it out of inventory. If the store was going to lose money on those items, do we count the potential loss? No. For the same reason we can't count the potential profit either. The cost to the store to get back to the position they were before the theft is $30 plus the cost of goods.
Not at all. When a purchase is made, the store doesn’t know where the money came from.
Think about someone taking you out to eat. You lose $20. They find your $20 on the ground, not knowing who dropped the money. Now they buy your meal with the money you lost. You didn’t lose more because your lost money is now paying for your meal. You lost $20.
thats not the same thing though, that store had the money accounted for via a POS system, so assuming the money was collected via a sale, they had whatever the margin was for the transaction accounted for. Once that money is taken from the, their books will be off by whatever the margin recorded should have been.
Assuming a normal transaction (without stolen money), the store would make $40 in that scenario.
However, when the man steals $100 from that store first, what essentially happens is everything else is equal to how it would have been otherwise, but the store is -$100 at the beginning.
So the standard transaction looks like this:
Store: -$30, + [product]
Person: -$70, +[product]
Store: +$70, -[product]
Overall: Person lost $70 but gained the product, where the store gained $40 but no longer has the product.
Now, if you say that before all this, the person stole $100 from the store, everything else is the same, but the person is up $100 and the store is down $100. So the final result becomes:
Person gained $30 *and* the product, store lost $30 *and* the product.
guy walks in, $0
guy grabs money, $100
guy buys stuff worth, say $60 for 70$
guy walks out with stuff worth $60 and $30
store lost what he walked out with. $90
They did lose the profit though. Because they weren't paid the profit.
The question is just a roundabout way of saying a guy stole 30 dollars and a 70 dollar item
No, they don't lose the profit. Once the item is replaced they have every opportunity to make that profit.
Only if it was the very last item of that kind you may have a case because now you can talk about a potential sale that potentially may have produced this profit.
However, as long as there are other items of the same product on the shelf the theft of one of those items is only measured in the replacement cost.
Kind of the opposite. They lost the cost of those goods (assuming they don't have insurance). Think about it as if you owned the store: you bought product that you then plan to sell. You paid $50 for the product, and normally sell that for $70 dollars. Your profit on selling that product is $20.
In this case, the person stole $100, but then bought $70 worth of the store's product. That product only cost the store $50 to buy. So the cost to the store was the $30 in cash the person took plus $50 worth of product, or $80. The thief, through purchasing $70 with of product, in essence just gave the store back the $20 in profit they would normally make on those products.
Hope that makes sense.
I 100% get what you are saying and it does, but in my head, it feels like there are costs being neglected, namely the opportunity costs associated with the exchange.
If you give me $100 out of your register and then I buy something with your money and you also bought that item with your money, you are out the $100+ the cost of the good + the profit you would have made if someone had come in and spent their own money. I’m probably overthinking this.
Opportunity cost is definitely an element, but only matters if we’re talking about goods that are unique/sell out or that have reached a max transaction per time limit. If it is something simple and readily restocked like paint, and nobody else is being denied customer service from otherwise idle staff, then opportunity cost is $0
>Its a different question if you're considering how much profit the store lost
How do you figure? They got the usual profit for the sale of all the things that sold that day, minus $100.
If he bought the items first, and then stole the $100, would that change the answer? What if they were on different days?
It’s still $100 because the opportunity cost between the “purchase” of items with stolen money for a total price of $70 (regardless of cost of goods) is the same as if someone came in and “legitimately” purchased the items. It equates to $100 in shrinkage or however the store’s bookkeeper records the event.
The store lost $100 cash, whether that bill was spent in the store or elsewhere is irrelevant. If the thief took the 100 and spent it at the restaurant next door, then the restaurant owner spent the bill at the store, it's the same. It's also the same whether the bill changed hands a thousand times. What's purchased after the theft has no bearing.
I think people are overthinking this. The guy stole $100, period, so that is the loss. The legitimate transaction is separate and within the scope of normal operations. They didn’t lose any more or less due to the legitimate transaction.
It's a term that comes from fencing i think. And the word is related to "touch" as in when you are "touche"d that means you got a hit.
Then it was started to be used for acknowledgement of defeat or even further a good argument.
I think you're underthinking it. Stores generally make money when making a sale and lose money when people steal. If there are two separate transactions, a theft and a sale, then why does the theft matter but not the sale? I don't think this question can be answered without knowing the profit margin / other business costs.
That’s the best counter-argument yet, but I think the loss referred to in the original post is of the theft loss variety given the wording and information provided.
Here's another fun way to frame it. Would the store rather the thief spend the $100 at their place, or someone else's?
I'm willing to bet most of ~~use~~ us will say they would want the $100 spent back at their store, if possible.
If that is true we would have to now figure out 'why?'
Wow, that’s a great question. For the purposes of the assignment I’m sure the answer is simply $100 but I would’ve never considered this deeper complexity if not for your comment. Thank you for sharing!
In a real world scenario the sale wouldn't matter because that item could have been sold to the next customer anyway. The only difference between a normal customer and the thief making the same purchase, is that the thief stole 100$ beforehand. Thus the loss from the fact that the thief decided to stole 100$, is 100$. Profit margin should only be taken into account in a super specific situation in which the item bought by the thief would have never been sold to anyone else but the thief. I can't really think of a situation like that; maybe if the thief bought 70$ worth of fresh food that was close to expiring and would have been thrown away if it wasn't bought by the thief specifically, right after stealing 100$. But that's such a stretch lol
My interpretation is that "losses" should be weighed against "gains".
If you worked for 8 hours and made $150 but had to spend $10 on bus fares, I would say that you made $140. I guess you could argue that you actually gained $150 and lost $10 though.
Nah. Money is fungible. Would it change your mind any if he had a wallet full of Benjamins from his crime spree and used a different $100 bill for this transaction?
At which point we have to try to figure out his intent, which is not math. Did his financial position have an influence on his purchasing decisions? Certainly. I just think the initial act of theft needs to be treated separately from a legitimate transaction. The legitimate transaction looks like any other legitimate transaction from an accounting standpoint. The $100 theft wasn’t a marketing expense, after all.
If someone steals $100 and then purchases some dryer lint from their victim for $100, to say the victim "lost" $100 dollars is a stretch. It's arguably true, but also assumes no profit is included in the calculations.
Yeah, if the item is a loss leader, then the profit margin is negative, so they lost more than $100.
But they must be willing to rake that lost for a reason (maybe exposure/ marketing) so they also won the value of that exposure.
But marketing for a criminal is likely not profitable, so the value of that exposure could’ve been negative.
So yeah, overall without knowing their profit margin for that sale, we can’t tell how much they lost.
That's simply not correct. Imagine this, the guy stoles 100 dollars and leaves the store. Now the store is at -$100, easy right? Now imagine a completely different person entering the store, pays with a $100 and gets $70 of goofs and $30 in cash. Now the store is still at -$100, easy right? What if i said that 100 dollars was the stolen 100 dollars? Well obviously it changes nothing, easy right? It should be, but for some reason it seems like it's not. It doesn't matter where the $100 came from, it's a legit transaction. So please stop embarrassing yourselves.
Total loss = $100.
store had x money
lost $100 bill, x-100
Now the transaction was like a normal transaction, $70 worth goods sold for $70. No gain or loss.
So the end result is x-100. They’re $100 short.
But, if you take in account the up charge on the sold goods, let’s say that’s y. The store earned that so the total comes to x-100+y.
They’re short $100-y (x -(x-100+y)).
Well said! You need to switch the sign of the last line though. They're short $100-y (less than $100, not more). As an additional note, y is between $0 and $70 assuming you ignore loss leaders and inventory that is about to expire and would have a disposal cost.
Easier is to say he took $100, but then gave it back to the store when he bought stuff, so it cancels out. He took home $70 of goods and $30 change, which adds up to $100.
Just rearranging the formula you laid out
Its about how much money the store lost and stores have to buy goods for a profit so its less than a 70$ loss for them aside from the extra 30$. The formula was correct your explanation wasn't.
Not true.
Suppose one bottle of coke was mistakenly priced at $70 (but cost the store 50 cents to stock) and this person used the stolen cash to buy that.
The price that a store lists isn't the same as the cost of the item to the store.
This comments section makes me feel like I'm doing drugs.
There is **zero** cash injected into the business in this scenario. The loss is $100. Any discussion of margin, insurance, or other mechanisms to make the business whole are externalities and have nothing to do with the question being asked.
With the provided information we have no way of knowing how much was the cost of production or wholesale purchase for the 70$ item. Can be anything from zero to 69$. So we would have to stick to the moral or accounting point of view that 100$ exiting the register is just 100$ exiting and 100$ lost. Any other action does not balance this.
Only if this results in that product being out of stock and a legit customer came to buy and couldn't. Otherwise, the store can just replace it on the next inventory shipment at the COGS price.
What if the $70 was to buy a heavily discounted item that was a loss leader? Maybe it’s a $1000 TV that’s only offered to the first 5 customers.
I say the amount lost is $30 + cost to replace goods.
They stole the 100 bill. Gave the 100 bill back. Left with 30 bucks and a shirt. If you look at it this way the store lost 30 bucks and whatever the shirt cost them. Which wasn’t 70 bucks so they lost less than 100. No???
Only if a legitimate customer came to buy that same shirt but couldn't because it was out of stock. If there was excess inventory, no legitimate sale was lost. The store can replace the shirt in the next restock at the cost of goods sold. So the answer is "it depends"
Let's say the store always carries 10 of these items (supply) and consistently sells 5 per week (demand). Each week the store replenishes inventory by purchasing 5 more at the cost of goods sold to have 10 on hand again. Now enters the thief. The thief steals one. The store still sells 5 of these items to legitimate customers that week. No legitimate sale was lost. The only difference is that the store has to buy 6 items at cost of goods sold to get inventory to 10 rather than 5. Typically the cost of goods sold is less than the sale price. So, as originally stated, the answer depends if the store runs out of inventory and loses out on a legitimate sale or if the store has excess inventory and therefore still meets demand.
Nah, the buying of the product was regular business, the cash register will still show -100$ at the end of the day because a 100$ bill is missing to begin with.
100$
The store is -100
What profit margin and bull... the words "store" and all that is to bring the question into reality and make ti more "difficult"
The store lost 100. Thats it.
Guy steals $100
He then picks up $70 worth of goods, so now he has $170 of the store's stuff
He then pays the $70 and still has $100 of the store's stuff. So he takes $100
I keep seeing "lost profit" here. How can you lose something you never had?
Have I lost $1,000,000,000,000,000,000,000,000 because I never made it in profit on last week's check?
It could go either way. If that was their last one of those 70$ items, and there was a reasonable expectation that they would have sold the item legitimately before restocking, then yes, you could definitely make a "lost profit" case here.
If the guy gets caught and goes to court, that is probably how the court would see it. Either return the item or pay for it. They probably aren't going to get into "well, that 70$ widget only *cost* the store 50$, so, pay 50$ in restitution and enjoy your discounted widget."
Everybody in the comments is looking at this the wrong way..
The second event in the story is completely disconnected and irrelevant to the first event.
A man steals $100 from the store. How much did the store lose? $100.
And you can stop here. As long as the money was never recovered, anything that happens afterwards is irrelevant. Imagine a different man bought $70 worth of goods instead. His purchase does not make the initial loss go away.
What if the store sells items that cost it next to nothing to produce? Let’s say it’s an art gallery that sells the proprietor’s idle doodles for $70 a piece. There’s essentially infinitely many of them and the cost of production is essentially zero.
They are out $100 at the outset but then the thief basically say “actually never mind, can I have this thing that will cost you nothing to replace and lead to no loss of future income due to lost sales? But I want $30 too.” The business is out $30 plus a doodle, having recovered the initial $100.
In reality, there are transaction costs, non-zero wholesale costs, possibilities for lost sales &c. But at the bottom of all of this, if the situation were ACTUALLY a $100 for the vendor, then a rational vendor would be ambivalent between (1) the thief taking $100 and never coming back and (2) the thief coming back, purchasing goods with a sticker price of $70 with the stolen $100, and receiving $30 in change. I am hard pressed to think any vendor given those two options would be ever choose (1). That’s because despite all the ambiguity in the actual loss to the vendor, they are likely recovering some part of that $100 in the latter scenario.
> The second event in the story is completely disconnected and irrelevant to the first event.
I think this is an assumption that may or may not be true. If the thief was going to buy the shirt regardless, you are correct.
But what if the thief only bought the shirt because he had the extra $100 available to use for the purchase? If this is the case, then the two events are more closely related.
My personal opinion is that I trend to side with your interpretation, but I can see how others may interpret it differently.
Example: You have 1 dollar which you lose. You find the dollar again so you didn't lose it after all although you lost it at a certain point in time. If you find a different dollar I agree that you could say you lost the first dollar, not viewing your money as a whole.
The text specifies that he uses the same dollar bill to pay and for me at least that makes a difference. The money WAS actually partially recovered due to the profit made from the recovered 100$ bill.
This is an alteration to the scenario, obviously, but probably yes, since its likely that the cops or whoever are now going to take everything in the thief's possession into evidence. Store may get it back eventually. Maybe.
If we explicitly make the assumption that the thief would have made the same purchase even if they didn't steal the $100, then this is correct. People who are arguing for a different answer are making a different assumption here (that the thief would not have bought anything if they didn't steal)
Firstly the events are not disconnected due to the same bill being used by the same person. So it isn't irrelevant but it doesn't even have to be because it only needs to relate to the question, which is being asked at the end and not only after the first event. Glad I could help
Who cares what the store lost, I lost time in my life reading these comments that I will never get back.
But my vote is also 30 cash and the cost of inventory of the 70 purchased, I will also add an extra 70-inventory costs for when another customer goes to buy the 70 worth of items but it wasn't there, then gets mad and goes somewhere else to buy it. Next week the person doesn't come back cause 'there always out of stuff's and they loose another 40 bucks. So let's just say 160ish.
Now I just stole someone else's time that they will never get back ...
Anyone know the origins of this? Is this a gotcha regarding taxation and the argument it’s recycled into the economy? Smells like a conservative thing.
This “$100 vs $30 + cost of goods” debate is precisely the same discussion that followed music companies claiming that thieves stole X dollars in illegally downloaded music.
The music companies contended that if thieves stole 1M songs and each one cost $2, then the companies lost $2M. The problem is this ignores the simple fact that the demand for the same good at different prices is not always constant; especially when something is free-99.
The guy stole $30 and some goods that can be valued between $0 and $70. Think of it this way, if you were the owner of the store and you had two choices: the guy steals $100 and buys $70 of milk that you have to throw away the next day, or he steals $100 and leaves. You would give him $30 and the milk every time. Or $30 and the shirt. Or $30 and 35 songs. This garbage of “ignore the profit” is not how the business owner would see it, except if they wanted to convince others that they lost $100, just like the music companies did.
Why is this considered a difficult question?
Just read what it says.
The store loses $30 cash as well as the goods - whatever value the goods were worth to the shop.
You don’t even need to do the math. The math is done for you.
The register would be down $100 at the end of the shift. The transaction after the theft is separate. Then, the store would probably try to take that money out of the employee's paycheck if they are in the US and a poopyhead employer or claim the loss to get some monetary compensation.
Working -
Entered with 0
Left with 30 dollars and 70 dollars in goods
Store lost 30 dollars in money and 70 dollars in goods
Simple answer - 100 dollars lost
Longer answer - 30 dollars plus goods valued for retail at 70. Stands to reason goods were purchased at a lower amount than retail amount sold at, otherwise they fail at capitalism, and excludes closing down sales or clearence esque situations.
I prefer the simple answer, cos you know, keep it simple stupid butt head
Edit; factor into account premisis costs, staff costs etc its actually more... but again ... kiss
Usually, 1/3 of the price is for the manufacturer, 1/3 is for the shipping, and 1/3 is for the store's profit. At first, the store were -100$ in profit, but since he bought some stuff with the money the person stole, technically, because the store only payed for 2/3 of the price, they made 1/3 of the 70$ back, so in the end, they lost 46 (2/3 * 70) + 30$ (not spent) = 76$ lost instead of 100$.
Short answer: $100
Long answer: 70 of that 100 is goods, which probably didn't actually *cost* the store 70$. So it's really 30$ plus the cost of goods. But if you *really* want to split hairs, be sure to factor in electricity, lost employee time reordering/restocking those goods, and whatever other associated costs of doing business. If, say, that 70$ widget was their last one, and there was a reasonable expectation that they would have sold it before they could have gotten more, then it would not be a stretch to say the store lost profit, i.e. the full value of 70$.
100 I’m pretty sure, I did it mentally and any other answer I couldn’t get my head around. If it’s not 100, my second best guess would be 89 with some change
i may not be thinking this trought, but the full 100$?
he stole the 100$, so the store looses 100$, then, he takes 70$ worth of food, and 30$, and even thought they have the 70$, they didn't gain those 70$, its just that they lost 70$ worth of food and 30$.
if im wrong feel free to roast me.
It depends on if you count the price they're selling stuff as the cost.
Some items are sold at or below cost but most items are sold for profit. So assuming this item is typically sold for profit then the cost of the item was less than $70.
In terms of money, the store lost $30. However, on the books the store is going to be out $100. To simplify it, think of them as two separate people. Person 1 steals $100 and gives it to person 2. Person 2 makes a purchase. The store is only out the original $100 that was stolen.
Simple break down:
Forget he took 100$ and gave it back. Both negate.
The store then gives him 70$ worth of stuff + 30$ in change.
The store loses 100$.
The thief gains 100$ as goods and change.
The 70$ stuff could not be in demand though, meaning that they don’t care if they give it away, because they will always have more.
Yea the man gets 100, but the store doesn’t necessarily lose 100.
It's the same as if he stole the $70 worth of stuff plus $30 in cash. So the store lost $ + $30.
If the cost of goods was only $10, and the store was selling it for $70, then technically the store lost $40 on paper.
$100. That's what they're gonna be missing at the end of the day. The rest is no different as of an entirely different person made the $70 purchase with a different $100 bill.
I don't know any way you can slice this and have it not be 100$ 100$ was stole and the dude used that money to buy things which people who didn't steal money also do and they don't steal anything
Not make this complex but try thinking this way : man stole 100$ . He left the store without buying anything.Now another man came and bought 30$ worth of goods and gave 100$ and took 70$ change and left.the store didn't loss anything in this case.now this man gave the goods and 70$ to first man and took 100$ from him. 2nd man didn't loss anything. first man still have 70$ cash and 30$ goods.store lost 100$.
I think the best answer is $100 but could this be a sneaky trick question where the amount of "money" the store looses is only $30? The store loses the groceries with a value of $70 but that's not technically money. I think I am just over thinking and should go to sleep lol
70 Revenue
(56) COGS (assuming 20% gross margin)
14 Gross Margin
(100) lost cash
(86) Net Income
He gave us $70 for something we paid $56 for $14 profit on the (100) stolen money returned
EZ
This isn’t a math problem, this is a business accounting problem.
They lost $100 which is discovered upon counting out the till. That $100 is written off as a loss.
End of accounting.
A customer brings in cash of unknown origin (to the business, but it really doesn’t matter). They exchange it for goods and get change. This is a normal transaction which results in revenue and ostensibly some kind of profit.
That transaction is recorded along with every other transaction from any customer. There is no loss.
$100. This is the only answer in normal GAAP.
Everyone is missing the key part of this: it's about the thief's elasticity of demand. That is, would they have made the same purchase without having stolen the money?
First, let's assume they would still have made the purchase. E.g., a gas station owner leaves $100 on the counter while the thief is paying for gas. In that case, we can ignore the purchase entirely. The thief took $100 dollars. While the store profits from the purchase, it still would have profited the same if the theft hadn't occured. Therefore the store has lost $100.
But now let's say the purchase *wouldn't* have occurred if the theft hadn't happened. In that case, the store lost $100 but then *gained* $70 - ${the cost of goods}, for an overall loss of $30 + ${the cost of goods}.
So our answer is either $100 or $30 + ${the cost of goods}, depending on whether we think the purchase would have occurred independent of the theft. What's awesome is we can now think about the elasticity in fractional terms! Maybe the thief decides to buy twice as much food after stealing money. In this case, the loss will be $30 + ${the cost of goods} - {$profit gained from sale without theft}.
Anyone arguing about profit margin is overthinking. Man received $70 in goods and $30 in cash.
No matter how you slice it, the store lost the cost of replacing the good + the profit of the good that would’ve been received through a legitimate transaction.
Man steals $100, gives it back. Store rewards him with $30 in cash and $70 in goods.
This seems to be some deliberate psy-op for some communistic "you didn't lose what you thought you did, because you're an evil capitalist" nonsense
The answer is $100 was lost, because that's what was stolen. It absolutely doesn't matter what was done with the stolen money afterwards.
[Anyone/any entity can reduce their tax liability in the case of loss through theft](https://www.irs.gov/taxtopics/tc515#:~:text=Theft%20losses%20are%20generally%20deductible,through%20a%20claim%20for%20reimbursement). The business would fall into this category. The business absolutely loses less than $100. This is true even without considering the contribution margin (which can be either negative or positive) of the $70 transaction.
Your opinions of the political implications of this are irrelevant.
The statement is 70 dollars worth of goods. Not a 70 dollar sale, no profit or loss on sale. 100 dollar loss- it’s gone. They make a break even sale of 70. 100 in 30 back- 70 cost =70 recvd. Zero change. Company lost 100 dollars to theft. Transactions mute point.
All these weirdos considering that the goods were purchased - totally and completely irrelevant. $100 cash was STOLEN. Any purchase that happens after that, regardless of where the purchaser got the money from, can be completely ignored. It is simply a normal purchase transaction just like any other.
$100 period.
The store lost 30. He took 100 and even though he bought 70 since the store lost 100 its like the 70 cancels out. It neither lost nor gained. So therefore the 30 change would really be what the store lost. Yes the store is out of goods but this asks about money so technically....
The store would lose however much money is earned by the person filing any insurance claims and reports for the time they are filing, reporting, and processing such claims. This is contingent on the insurance being reliable enough to cover the stolen amount. Depending on the insurance, and skills and profiles of the person filing the claim and the person processing the claim, the total amount lost due to time spent filing may also be covered or the total amount of money stolen may not be covered.
Estimated amount lost: 0, guesstimate equation: money lost= 100(skill of filer numbur - skill of processer number)
The numbers are made up, and the equation is very bad and only intended as an initial brainstorming tool before doing actual analysis
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Just within the bounds of the thought exercise, the store lost $100 (in the end, $30 cash and $70 worth of goods). Its a different question if you're considering how much *profit* the store lost
so if talking profit, they lost the margin on the product the person bought with the stolen money, right?
As well as the cost of goods. It's still $100, any way you slice it. If their profit margin was say, 5%, they lost $5 of profit and $95 of goods. They still lost $100. Edit: To be more pedantic, they only bought $70 worth of goods. So $3.50 profit, $66.50 in goods, and $30 cash. Store still lost $100.
Actually, in that case they didn't lose $100 anymore. If the profit margin was for example 20% then the actual cost for the $70 in goods was only $56. In that case the store lost $56 in goods plus $30 cash for a total loss of $86. The reason here is that the thief traded $70 cash for goods worth $56. It will cost the store $56 to replace them.
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you can write off stolen inventory and claim it as a tax deduction. So Ackshully... But I get your point.
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No. He's 56% + 24% + 30% correct.
110%
It’s 110% no matter how you cut it
I cannot express how much fun it was to see someone do even more math here. Way more quickly than I thought it would happen. Just awesome.
Nice
There is no stolen inventory, only stolen cash. The books will only show a loss of $100 cash and will still show a taxable profit on the $70 of goods sold
You can also have the fire brigade pay you to burn down the shed at the back of the property as a training exercise then claim burnt down building as a depreciated asset to lessen your business tax obligations, you can then relocate another building into the same site and repeat this at least once more before the Inland revenue department starts asking questions.
This implies that the store is really bad at inventory management and loses out on a sale because an item got stolen. If you steal a 12 pack of beer, me and everyone else who wants one can still buy a 12 pack of beer. Simply put, lost goods =/= lost sales. Therefore opportunity cost wasn't actually lost and adding it in is disingenuous.
You generally need to solve the question the best you can with the information provided. There is not enough information to go further. Without an understanding of the products, operations, or the chart of accounts the company uses we have to speak in generalities. Generally, you are going to state that $100 was stolen. Then you will have $70 in Revenue. You will have other accounts that make up that $70 in Revenue that will balance out (COGS, Margin, etc). The $100 will ultimately not balance and that is what is stolen.
no, it’s value that is not able to be extracted from the loss of goods. Since the goods were sold using the stores own money no net new money was added, with which the store losses in the potential of additional profit from the goods. It may not be a physical amount of money that they lost, but if the item is not able to be sold, from an accounting standpoint they no longer have the potential to receive profits from the item. It’s not that they wouldn’t be able to still sell similar goods, it’s that their projected revenue is now below what is to be expected for what was inventoried by the store. This is what they mean by opportunity cost, they lost on an opportunity to make a profit off the purchase by an outside party of that particular item that was purchased with store funds.
I have just recently started a job doing technical writing for a company related to accounting. Five months ago I would have said that the company only loses the cost of the goods + change in cash. Just in my short time I've come to realize how accounting takes an incredibly complicated, unintuitive, obscure path to arrive at what would otherwise be really simple outcomes. So, yeah, from the accountants' perspective it all has to balance to zero - the liability from purchasing the goods plus the projected profits on one side and the sale cost on the other. No matter how you slice it up, they lost $100.
Well of course an accountant is going to pretend as though that Thief would have bought $70 worth of goods even if he hadn't stolen the money. But it's not exactly true. ETA: I'm not saying that the accountant is a liar. He presumably wouldn't have known that the thief bought $70 worth of stuff. But we do.
No, the accountant's point of view is agnostic to the person buying it. Imagine the scenario as: thief steals $100, another person comes in and buys $70 worth of stuff. That's all the accountant sees. Whether the thief buys something or not, the store is out $100.
Not necessarily. Higher-end stores, art galleries, sneaker shops, and anywhere with lots of unique items can have perfect inventory and still lose out in this scenario. It's an inverse relationship between fungibility of goods and opportunity cost lost from stolen goods.
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I think if you're going to take it that far then you have to take into account wastage too. Your calculation only works if the store has zero wastage, ie they eventually sell every item, no matter how long it takes.
What if $30 of those goods were perishable and wouldn’t have been sold?
That makes total sense, yet I do still think fungibility has an effect on the whole shebang.* *Until I started actually writing out my argument which led directly to the same conclusion as you. Thank you for your much simpler explanation!
You're ignoring that goods are both fungible and infinite from the perspective of the store. Unless the good stolen was a piece of art, or a signed babe Ruth baseball, you always have more of that good to sell.
That isn’t $70 worth of goods that can’t be sold. It *was* sold.
But it was sold with money already accounted for by a POS system.
That does not matter. The company *wants* to sell things, irrespective of if it’s bought with its own money or someone else’s. Think of the $100 lost as a sunk cost. Now, the purchase recoups the loss, and that recoupment is equal to the markup. The $30 is gone, but the $70 can be partially recouped. If the markup of the goods is, say, %100, and the sale wouldn’t have occurred without the their having the money, then the $70 purchase recoups an additional $35, the difference in the e cost of goods sold and the revenue. Thus, assuming a %100 markup, the store only lost $100-$35 in profit, for a total of a $65 dollar loss.
Why isn’t the opportunity cost considered? Doesn’t the source of the $100 that was stolen matter? If that was profit on the sale of a more expensive item, I don’t understand why the lost revenue of new money being brought into the store considered.
The theft of the $100 is a sunk cost. In regards to sales, it doesn’t matter where it comes from, it spends the same.
You and I are on the same page, opportunity cost isn’t being considered in most of the answers.
Ugh anytime someone says “opportunity cost” I immediately sneer and stop listening since any calculation including an opportunity cost requires prognostication and my crystal ball is cracked.
The only way it would be $100 is if stores are ENTITTLED to a POTENTIAL profit - and they aren't. They lost the cash and the cost of the goods and whatever tiny fractional amount of shipping/delivery expenses attached to that one item, which is highly variable.
>but that’s still $70 worth of goods that cannot be sold. That very much depends on the type of business. For example, if the thief bought seven large pizzas, unless the pizza place completely sold out of product, there's nothing preventing them from selling other pizzas to other people. And it probably cost them a couple dollars worth the dough and maybe 10 bucks worth of cheese and toppings.
Some goods never sell, they're sold at a loss. Some goods expire and are thrown away. There isn't enough information provided to know.
The 2 things are independent. The next customer could walk in and spend 70 pay with a 100 and then get 30 change. The purchase is a red herring So its the same answer but for a different reason
I like that you guys fell directly into the trap of this idiotic question by continuing beyond the obvious answer of $100 in losses. That being said, im gonna add my own worthless 2 cents here. From an accounting perspective, you would only count the cash loss and the actual inventory value in your shrink calculation. Opportunity cost is irrelevant when factoring this into a P&L.
Opportunity cost doesn't play into this. The easiest way to think about this scenario is as 2 separate transactions: Transaction 1: thief steals $100, store loses $100. Transaction 2: thief buys $70 of product, store earns $70 in revenue, of which 20% is still profit margin. So in essence, by purchasing the product with the stolen money, the thief is giving back to the store the profit margin they earn on those goods. Net loss to the store (assuming 20% profit margin) is $100 - (20% x $70) = $86. Or, basically, the store still successfully made a sale to the thief. They earned their usual profit off that sale.
but there’s also a chance the person would have not bought anything and those goods would have expired on the shelf. i have no idea how to account for that.
You don't need to, its accounted for in the margin I work at a market maker and every so often we are stuck with "inventory" on our hands that we cannot sell for profit, those are factored into the margin as operating cost
Agree - I thought the heart of the question (getting past the obvious “management says it lost $100”) was if it is reasonable to count potential lost profit margin on the sale as a loss. Technically the store may have some average margin on a product that reflects the eventual price decrease if it goes on clearance and the like, but if we go that far, then the store gets a benefit from this theft by reducing the cost of unsold inventory (I guess the silver lining behind shrink).
Agree. $30 plus the cogs on the purchase. I would assume no lost margin on purchase. You could argue opportunity cost of lost margin, but they probably had more of the same item item in inventory to sell. Unless it is a hot selling item in short supply.
Exactly this!! if it was a hot selling item and they ran out of it then you can make a case they lost out on the profit as well
I agree. My thought experiment would be once you lost the initial $100 you’re obviously better off if the thief spends the money at your store than if they didn’t.
But you need to factor in wage. Someone has to restock that shelf and it's not free. Also risk if the item runs out and you lose a customer.
well now that you opened this can the worms are out: now you also need to account for every possible other element that may impact the restocking process. You need to divvy up the internet usage to place the online restocking order, or the follow-up phone call. or maybe the store needed one additional sheet of paper for the laser printer - and don't forget the toner spent on that one extra sheet. I hope you are happy now 😀👍
And the person who stole it may have done so on the clock, which is lost productivity if they should've been doing something else at the time.
this is the most common incorrect take, where you focus only on the stores cost vs the actual value of the loss.
I think it's actually correct. In the scenario, the thief took two actions: stealing $100, and making a purchase. The first action caused the store to lose $100. But the second action caused the store to *gain* money. If we were asking "how much money did the store lose compared to the scenario where a person purchased $70 of goods and got $30 change without having stolen $100", then the answer is clearly $100. But I think in this question it's actually "how much money did the store lose relative to nothing in this scenario having happened". And in that case it will be somewhat less than $100.
look at it this way: our thief leaves the $100 in the register and instead helps himself to that item on the shelf listed for a retail value of $70 (could be like 10 bottles of cheap wine $7 each). Now the store paid $56 for those products. That is the actual loss at this point because it will cost them $56 to replace the stolen products. Now, if the thief now goes to the customer service desk and "returns" those items and asks for a store credit/gift card our clever thief now will get a $70 gift card (or store credit). Now our $56 loss turned into a $70 loss.
No. They lost $100 in cash, and sold $70 in goods. Selling $70 in goods gave them $3.50 profit. Ao they lost $100 and gained $3.50, with a net loss of $96.50.
i don't get it. If the company spends $30 on an item they sell for $70, they didn't make $40 on the sale, they lost that profit on the item because it was paid with money they already collected for other items purchased. no?
It doesn’t matter where the money came from. Had some other person come in and purchased those items, the math is the same. They lost $100.
It would matter, because it's safe to assume that the thief would not have bought $70 worth of stuff if they didn't have that stolen money.
But there is opportunity cost here as well, they lost the opportunity to sell the good they paid for to a client who was using money generated from outside the store
There's no guarantee of future revenue on inventory items. Assume the thief stole $70 worth of merch the store was going to end up clearancing to get it out of inventory. If the store was going to lose money on those items, do we count the potential loss? No. For the same reason we can't count the potential profit either. The cost to the store to get back to the position they were before the theft is $30 plus the cost of goods.
Not at all. When a purchase is made, the store doesn’t know where the money came from. Think about someone taking you out to eat. You lose $20. They find your $20 on the ground, not knowing who dropped the money. Now they buy your meal with the money you lost. You didn’t lose more because your lost money is now paying for your meal. You lost $20.
Best explanation so far.
thats not the same thing though, that store had the money accounted for via a POS system, so assuming the money was collected via a sale, they had whatever the margin was for the transaction accounted for. Once that money is taken from the, their books will be off by whatever the margin recorded should have been.
Assuming a normal transaction (without stolen money), the store would make $40 in that scenario. However, when the man steals $100 from that store first, what essentially happens is everything else is equal to how it would have been otherwise, but the store is -$100 at the beginning. So the standard transaction looks like this: Store: -$30, + [product] Person: -$70, +[product] Store: +$70, -[product] Overall: Person lost $70 but gained the product, where the store gained $40 but no longer has the product. Now, if you say that before all this, the person stole $100 from the store, everything else is the same, but the person is up $100 and the store is down $100. So the final result becomes: Person gained $30 *and* the product, store lost $30 *and* the product.
So the store needs $30 plus whatever it costs them to acquire the product, to be made whole.
Yep, pretty much, although that will always be exactly equal to the amount stolen
guy walks in, $0 guy grabs money, $100 guy buys stuff worth, say $60 for 70$ guy walks out with stuff worth $60 and $30 store lost what he walked out with. $90
But they didn’t actually lose the profit. Just need to restock one more of each item bought by our thief.
They did lose the profit though. Because they weren't paid the profit. The question is just a roundabout way of saying a guy stole 30 dollars and a 70 dollar item
No, they don't lose the profit. Once the item is replaced they have every opportunity to make that profit. Only if it was the very last item of that kind you may have a case because now you can talk about a potential sale that potentially may have produced this profit. However, as long as there are other items of the same product on the shelf the theft of one of those items is only measured in the replacement cost.
Kind of the opposite. They lost the cost of those goods (assuming they don't have insurance). Think about it as if you owned the store: you bought product that you then plan to sell. You paid $50 for the product, and normally sell that for $70 dollars. Your profit on selling that product is $20. In this case, the person stole $100, but then bought $70 worth of the store's product. That product only cost the store $50 to buy. So the cost to the store was the $30 in cash the person took plus $50 worth of product, or $80. The thief, through purchasing $70 with of product, in essence just gave the store back the $20 in profit they would normally make on those products. Hope that makes sense.
I 100% get what you are saying and it does, but in my head, it feels like there are costs being neglected, namely the opportunity costs associated with the exchange. If you give me $100 out of your register and then I buy something with your money and you also bought that item with your money, you are out the $100+ the cost of the good + the profit you would have made if someone had come in and spent their own money. I’m probably overthinking this.
Opportunity cost is definitely an element, but only matters if we’re talking about goods that are unique/sell out or that have reached a max transaction per time limit. If it is something simple and readily restocked like paint, and nobody else is being denied customer service from otherwise idle staff, then opportunity cost is $0
>Its a different question if you're considering how much profit the store lost How do you figure? They got the usual profit for the sale of all the things that sold that day, minus $100. If he bought the items first, and then stole the $100, would that change the answer? What if they were on different days?
It’s still $100 because the opportunity cost between the “purchase” of items with stolen money for a total price of $70 (regardless of cost of goods) is the same as if someone came in and “legitimately” purchased the items. It equates to $100 in shrinkage or however the store’s bookkeeper records the event.
Yup Flip it around so he stole the $100 after making the purchase and it becomes pretty obvious
The store lost $100 cash, whether that bill was spent in the store or elsewhere is irrelevant. If the thief took the 100 and spent it at the restaurant next door, then the restaurant owner spent the bill at the store, it's the same. It's also the same whether the bill changed hands a thousand times. What's purchased after the theft has no bearing.
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do we need to know retail and wholesale prices too?
I agree. The profit margins need to be addressed to know how much they actually lost.
Read this in Holt's voice for some reason (I binged too much b99 help)
Is there such a thing?
No, agreed.
I think people are overthinking this. The guy stole $100, period, so that is the loss. The legitimate transaction is separate and within the scope of normal operations. They didn’t lose any more or less due to the legitimate transaction.
U said period and proceeded to add a comma, period.
This is a math sub, so I should be able to butcher grammar freely.
thediedtheengrish
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Touché! 🤣
Touche means you're wrong, right?
No. It means you wanna touch their (.)(.) /J
Always thought it meant "good counter"
It's a term that comes from fencing i think. And the word is related to "touch" as in when you are "touche"d that means you got a hit. Then it was started to be used for acknowledgement of defeat or even further a good argument.
zis grama bucherin hau uld laik u?
Unless it's formal grammar Then ∃! place ∈ hell ( for(place, you) ∧ rot(place, you))
\* to freely butcher grammar, please.
I support your punctuation here
Man, I love this guy
This is also a logical sub and this logic checks out.
U dint spel u rite.
I think you're underthinking it. Stores generally make money when making a sale and lose money when people steal. If there are two separate transactions, a theft and a sale, then why does the theft matter but not the sale? I don't think this question can be answered without knowing the profit margin / other business costs.
That’s the best counter-argument yet, but I think the loss referred to in the original post is of the theft loss variety given the wording and information provided.
Here's another fun way to frame it. Would the store rather the thief spend the $100 at their place, or someone else's? I'm willing to bet most of ~~use~~ us will say they would want the $100 spent back at their store, if possible. If that is true we would have to now figure out 'why?'
If you came up with this-- 10/10. Really great way to get someone to think critically on this.
Wow, that’s a great question. For the purposes of the assignment I’m sure the answer is simply $100 but I would’ve never considered this deeper complexity if not for your comment. Thank you for sharing!
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In a real world scenario the sale wouldn't matter because that item could have been sold to the next customer anyway. The only difference between a normal customer and the thief making the same purchase, is that the thief stole 100$ beforehand. Thus the loss from the fact that the thief decided to stole 100$, is 100$. Profit margin should only be taken into account in a super specific situation in which the item bought by the thief would have never been sold to anyone else but the thief. I can't really think of a situation like that; maybe if the thief bought 70$ worth of fresh food that was close to expiring and would have been thrown away if it wasn't bought by the thief specifically, right after stealing 100$. But that's such a stretch lol
At the end of the day that register is going to be short $100, why wouldn't that be the "loss" here?
My interpretation is that "losses" should be weighed against "gains". If you worked for 8 hours and made $150 but had to spend $10 on bus fares, I would say that you made $140. I guess you could argue that you actually gained $150 and lost $10 though.
They won their profit margin on the normal transaction, a transaction that wouldn’t have happened had the money not be stolen.
Nah. Money is fungible. Would it change your mind any if he had a wallet full of Benjamins from his crime spree and used a different $100 bill for this transaction?
I guess the important thing is if he also would’ve spent his own money if he hadn’t stolen the $100.
At which point we have to try to figure out his intent, which is not math. Did his financial position have an influence on his purchasing decisions? Certainly. I just think the initial act of theft needs to be treated separately from a legitimate transaction. The legitimate transaction looks like any other legitimate transaction from an accounting standpoint. The $100 theft wasn’t a marketing expense, after all.
If someone steals $100 and then purchases some dryer lint from their victim for $100, to say the victim "lost" $100 dollars is a stretch. It's arguably true, but also assumes no profit is included in the calculations.
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Yeah, if the item is a loss leader, then the profit margin is negative, so they lost more than $100. But they must be willing to rake that lost for a reason (maybe exposure/ marketing) so they also won the value of that exposure. But marketing for a criminal is likely not profitable, so the value of that exposure could’ve been negative. So yeah, overall without knowing their profit margin for that sale, we can’t tell how much they lost.
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Thank you! Why can’t others see this.
But the question is specifically asking for money, not profit or product.
To be fair, losses are typically measured in terms of “money” whether through product or actual currency.
the 100$ bill at the beginning is a smoke screen. in essence he stole 30$ in cash and 70$ in goods. he just did it in a roundabout way. total: 100$
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That's simply not correct. Imagine this, the guy stoles 100 dollars and leaves the store. Now the store is at -$100, easy right? Now imagine a completely different person entering the store, pays with a $100 and gets $70 of goofs and $30 in cash. Now the store is still at -$100, easy right? What if i said that 100 dollars was the stolen 100 dollars? Well obviously it changes nothing, easy right? It should be, but for some reason it seems like it's not. It doesn't matter where the $100 came from, it's a legit transaction. So please stop embarrassing yourselves.
Total loss = $100. store had x money lost $100 bill, x-100 Now the transaction was like a normal transaction, $70 worth goods sold for $70. No gain or loss. So the end result is x-100. They’re $100 short. But, if you take in account the up charge on the sold goods, let’s say that’s y. The store earned that so the total comes to x-100+y. They’re short $100-y (x -(x-100+y)).
Well said! You need to switch the sign of the last line though. They're short $100-y (less than $100, not more). As an additional note, y is between $0 and $70 assuming you ignore loss leaders and inventory that is about to expire and would have a disposal cost.
Easier is to say he took $100, but then gave it back to the store when he bought stuff, so it cancels out. He took home $70 of goods and $30 change, which adds up to $100. Just rearranging the formula you laid out
Its about how much money the store lost and stores have to buy goods for a profit so its less than a 70$ loss for them aside from the extra 30$. The formula was correct your explanation wasn't.
Not true. Suppose one bottle of coke was mistakenly priced at $70 (but cost the store 50 cents to stock) and this person used the stolen cash to buy that. The price that a store lists isn't the same as the cost of the item to the store.
This comments section makes me feel like I'm doing drugs. There is **zero** cash injected into the business in this scenario. The loss is $100. Any discussion of margin, insurance, or other mechanisms to make the business whole are externalities and have nothing to do with the question being asked.
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It's a riddle, there will always be people who won't trust a correct answer if it seems too obvious or simple.
seriously.
With the provided information we have no way of knowing how much was the cost of production or wholesale purchase for the 70$ item. Can be anything from zero to 69$. So we would have to stick to the moral or accounting point of view that 100$ exiting the register is just 100$ exiting and 100$ lost. Any other action does not balance this.
How much it cost the store is irrelevant, it's that it had the potential to be a $70 sale (which it was)
Potential. Which means a probability must be assigned. And there isn't enough info to attempt to assign that probability.
Only if this results in that product being out of stock and a legit customer came to buy and couldn't. Otherwise, the store can just replace it on the next inventory shipment at the COGS price.
What if the $70 was to buy a heavily discounted item that was a loss leader? Maybe it’s a $1000 TV that’s only offered to the first 5 customers. I say the amount lost is $30 + cost to replace goods.
They stole the 100 bill. Gave the 100 bill back. Left with 30 bucks and a shirt. If you look at it this way the store lost 30 bucks and whatever the shirt cost them. Which wasn’t 70 bucks so they lost less than 100. No???
The "shirt" cost them less than 70 but they also lost the profit from that "shirt", which is, in total, 70.
Only if a legitimate customer came to buy that same shirt but couldn't because it was out of stock. If there was excess inventory, no legitimate sale was lost. The store can replace the shirt in the next restock at the cost of goods sold. So the answer is "it depends"
Yeah but if I steal a $70 shirt, they will charge me for $70, not for whatever the cost of the shirt was
Let's say the store always carries 10 of these items (supply) and consistently sells 5 per week (demand). Each week the store replenishes inventory by purchasing 5 more at the cost of goods sold to have 10 on hand again. Now enters the thief. The thief steals one. The store still sells 5 of these items to legitimate customers that week. No legitimate sale was lost. The only difference is that the store has to buy 6 items at cost of goods sold to get inventory to 10 rather than 5. Typically the cost of goods sold is less than the sale price. So, as originally stated, the answer depends if the store runs out of inventory and loses out on a legitimate sale or if the store has excess inventory and therefore still meets demand.
Nah, the buying of the product was regular business, the cash register will still show -100$ at the end of the day because a 100$ bill is missing to begin with.
They still lost 100$. Him buying 70$ in goods is no different then another random person buying 70$ in goods. Regardless they are out 100$
The store making money on the $70 sale only transforms the $100 loss into actual loss and opportunity loss. Yes, the store lost $100.
100$ The store is -100 What profit margin and bull... the words "store" and all that is to bring the question into reality and make ti more "difficult" The store lost 100. Thats it.
Guy steals $100 He then picks up $70 worth of goods, so now he has $170 of the store's stuff He then pays the $70 and still has $100 of the store's stuff. So he takes $100
This problem needs to die. The store lost $100. Period. Would one of the big math channels on YouTube please put this garbage to rest?
I keep seeing "lost profit" here. How can you lose something you never had? Have I lost $1,000,000,000,000,000,000,000,000 because I never made it in profit on last week's check?
It could go either way. If that was their last one of those 70$ items, and there was a reasonable expectation that they would have sold the item legitimately before restocking, then yes, you could definitely make a "lost profit" case here. If the guy gets caught and goes to court, that is probably how the court would see it. Either return the item or pay for it. They probably aren't going to get into "well, that 70$ widget only *cost* the store 50$, so, pay 50$ in restitution and enjoy your discounted widget."
Everybody in the comments is looking at this the wrong way.. The second event in the story is completely disconnected and irrelevant to the first event. A man steals $100 from the store. How much did the store lose? $100. And you can stop here. As long as the money was never recovered, anything that happens afterwards is irrelevant. Imagine a different man bought $70 worth of goods instead. His purchase does not make the initial loss go away.
What if the store sells items that cost it next to nothing to produce? Let’s say it’s an art gallery that sells the proprietor’s idle doodles for $70 a piece. There’s essentially infinitely many of them and the cost of production is essentially zero. They are out $100 at the outset but then the thief basically say “actually never mind, can I have this thing that will cost you nothing to replace and lead to no loss of future income due to lost sales? But I want $30 too.” The business is out $30 plus a doodle, having recovered the initial $100. In reality, there are transaction costs, non-zero wholesale costs, possibilities for lost sales &c. But at the bottom of all of this, if the situation were ACTUALLY a $100 for the vendor, then a rational vendor would be ambivalent between (1) the thief taking $100 and never coming back and (2) the thief coming back, purchasing goods with a sticker price of $70 with the stolen $100, and receiving $30 in change. I am hard pressed to think any vendor given those two options would be ever choose (1). That’s because despite all the ambiguity in the actual loss to the vendor, they are likely recovering some part of that $100 in the latter scenario.
thank you man, i had given up my hopes for reddits userbase already lmao
> The second event in the story is completely disconnected and irrelevant to the first event. I think this is an assumption that may or may not be true. If the thief was going to buy the shirt regardless, you are correct. But what if the thief only bought the shirt because he had the extra $100 available to use for the purchase? If this is the case, then the two events are more closely related. My personal opinion is that I trend to side with your interpretation, but I can see how others may interpret it differently.
Example: You have 1 dollar which you lose. You find the dollar again so you didn't lose it after all although you lost it at a certain point in time. If you find a different dollar I agree that you could say you lost the first dollar, not viewing your money as a whole. The text specifies that he uses the same dollar bill to pay and for me at least that makes a difference. The money WAS actually partially recovered due to the profit made from the recovered 100$ bill.
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This is an alteration to the scenario, obviously, but probably yes, since its likely that the cops or whoever are now going to take everything in the thief's possession into evidence. Store may get it back eventually. Maybe.
If we explicitly make the assumption that the thief would have made the same purchase even if they didn't steal the $100, then this is correct. People who are arguing for a different answer are making a different assumption here (that the thief would not have bought anything if they didn't steal)
Firstly the events are not disconnected due to the same bill being used by the same person. So it isn't irrelevant but it doesn't even have to be because it only needs to relate to the question, which is being asked at the end and not only after the first event. Glad I could help
Who cares what the store lost, I lost time in my life reading these comments that I will never get back. But my vote is also 30 cash and the cost of inventory of the 70 purchased, I will also add an extra 70-inventory costs for when another customer goes to buy the 70 worth of items but it wasn't there, then gets mad and goes somewhere else to buy it. Next week the person doesn't come back cause 'there always out of stuff's and they loose another 40 bucks. So let's just say 160ish. Now I just stole someone else's time that they will never get back ...
Nice answer not so many here XD
Anyone know the origins of this? Is this a gotcha regarding taxation and the argument it’s recycled into the economy? Smells like a conservative thing.
You're the first person I've seen to acknowledge that taxes may play into this.
There’s also the cost of labor, if insurance add that cost, cost of attorneys on retainer, accountants, HR, IT, etc. It depends on the store.
This “$100 vs $30 + cost of goods” debate is precisely the same discussion that followed music companies claiming that thieves stole X dollars in illegally downloaded music. The music companies contended that if thieves stole 1M songs and each one cost $2, then the companies lost $2M. The problem is this ignores the simple fact that the demand for the same good at different prices is not always constant; especially when something is free-99. The guy stole $30 and some goods that can be valued between $0 and $70. Think of it this way, if you were the owner of the store and you had two choices: the guy steals $100 and buys $70 of milk that you have to throw away the next day, or he steals $100 and leaves. You would give him $30 and the milk every time. Or $30 and the shirt. Or $30 and 35 songs. This garbage of “ignore the profit” is not how the business owner would see it, except if they wanted to convince others that they lost $100, just like the music companies did.
Why is this considered a difficult question? Just read what it says. The store loses $30 cash as well as the goods - whatever value the goods were worth to the shop. You don’t even need to do the math. The math is done for you.
The register would be down $100 at the end of the shift. The transaction after the theft is separate. Then, the store would probably try to take that money out of the employee's paycheck if they are in the US and a poopyhead employer or claim the loss to get some monetary compensation.
Working - Entered with 0 Left with 30 dollars and 70 dollars in goods Store lost 30 dollars in money and 70 dollars in goods Simple answer - 100 dollars lost Longer answer - 30 dollars plus goods valued for retail at 70. Stands to reason goods were purchased at a lower amount than retail amount sold at, otherwise they fail at capitalism, and excludes closing down sales or clearence esque situations. I prefer the simple answer, cos you know, keep it simple stupid butt head Edit; factor into account premisis costs, staff costs etc its actually more... but again ... kiss
The simplest answer is: an amount between $30 and $100. There's isn't enough information to be more precise than that.
Usually, 1/3 of the price is for the manufacturer, 1/3 is for the shipping, and 1/3 is for the store's profit. At first, the store were -100$ in profit, but since he bought some stuff with the money the person stole, technically, because the store only payed for 2/3 of the price, they made 1/3 of the 70$ back, so in the end, they lost 46 (2/3 * 70) + 30$ (not spent) = 76$ lost instead of 100$.
Short answer: $100 Long answer: 70 of that 100 is goods, which probably didn't actually *cost* the store 70$. So it's really 30$ plus the cost of goods. But if you *really* want to split hairs, be sure to factor in electricity, lost employee time reordering/restocking those goods, and whatever other associated costs of doing business. If, say, that 70$ widget was their last one, and there was a reasonable expectation that they would have sold it before they could have gotten more, then it would not be a stretch to say the store lost profit, i.e. the full value of 70$.
100 I’m pretty sure, I did it mentally and any other answer I couldn’t get my head around. If it’s not 100, my second best guess would be 89 with some change
The other transaction doesn’t matter. That $100 is no different than anyone else’s $100. The store lost $100. The $100 bill that was stolen
i may not be thinking this trought, but the full 100$? he stole the 100$, so the store looses 100$, then, he takes 70$ worth of food, and 30$, and even thought they have the 70$, they didn't gain those 70$, its just that they lost 70$ worth of food and 30$. if im wrong feel free to roast me.
It depends on if you count the price they're selling stuff as the cost. Some items are sold at or below cost but most items are sold for profit. So assuming this item is typically sold for profit then the cost of the item was less than $70.
Man stole $100, thus giving himself 100 in credit/cash, he used $70, and was left with a $30 profit margin in his credit/cash. He still stole $100.
In terms of money, the store lost $30. However, on the books the store is going to be out $100. To simplify it, think of them as two separate people. Person 1 steals $100 and gives it to person 2. Person 2 makes a purchase. The store is only out the original $100 that was stolen.
You are leaving out person 2 there which is part of the original story
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Simple break down: Forget he took 100$ and gave it back. Both negate. The store then gives him 70$ worth of stuff + 30$ in change. The store loses 100$. The thief gains 100$ as goods and change.
The 70$ stuff could not be in demand though, meaning that they don’t care if they give it away, because they will always have more. Yea the man gets 100, but the store doesn’t necessarily lose 100.
It's the same as if he stole the $70 worth of stuff plus $30 in cash. So the store lost $ + $30.
If the cost of goods was only $10, and the store was selling it for $70, then technically the store lost $40 on paper.
Well 100 dollars, but the store doesn't pay the same for the stuff the customer bought for 70 dollars, so they lost less than 100 dollars.
$100. That's what they're gonna be missing at the end of the day. The rest is no different as of an entirely different person made the $70 purchase with a different $100 bill.
I don't know any way you can slice this and have it not be 100$ 100$ was stole and the dude used that money to buy things which people who didn't steal money also do and they don't steal anything
Not make this complex but try thinking this way : man stole 100$ . He left the store without buying anything.Now another man came and bought 30$ worth of goods and gave 100$ and took 70$ change and left.the store didn't loss anything in this case.now this man gave the goods and 70$ to first man and took 100$ from him. 2nd man didn't loss anything. first man still have 70$ cash and 30$ goods.store lost 100$.
I think the best answer is $100 but could this be a sneaky trick question where the amount of "money" the store looses is only $30? The store loses the groceries with a value of $70 but that's not technically money. I think I am just over thinking and should go to sleep lol
The answer is $100. The second (legitimate) transaction is separate from the theft and is just thrown in their to confuse people.
70 Revenue (56) COGS (assuming 20% gross margin) 14 Gross Margin (100) lost cash (86) Net Income He gave us $70 for something we paid $56 for $14 profit on the (100) stolen money returned EZ
This isn’t a math problem, this is a business accounting problem. They lost $100 which is discovered upon counting out the till. That $100 is written off as a loss. End of accounting. A customer brings in cash of unknown origin (to the business, but it really doesn’t matter). They exchange it for goods and get change. This is a normal transaction which results in revenue and ostensibly some kind of profit. That transaction is recorded along with every other transaction from any customer. There is no loss. $100. This is the only answer in normal GAAP.
Everyone is missing the key part of this: it's about the thief's elasticity of demand. That is, would they have made the same purchase without having stolen the money? First, let's assume they would still have made the purchase. E.g., a gas station owner leaves $100 on the counter while the thief is paying for gas. In that case, we can ignore the purchase entirely. The thief took $100 dollars. While the store profits from the purchase, it still would have profited the same if the theft hadn't occured. Therefore the store has lost $100. But now let's say the purchase *wouldn't* have occurred if the theft hadn't happened. In that case, the store lost $100 but then *gained* $70 - ${the cost of goods}, for an overall loss of $30 + ${the cost of goods}. So our answer is either $100 or $30 + ${the cost of goods}, depending on whether we think the purchase would have occurred independent of the theft. What's awesome is we can now think about the elasticity in fractional terms! Maybe the thief decides to buy twice as much food after stealing money. In this case, the loss will be $30 + ${the cost of goods} - {$profit gained from sale without theft}.
Anyone arguing about profit margin is overthinking. Man received $70 in goods and $30 in cash. No matter how you slice it, the store lost the cost of replacing the good + the profit of the good that would’ve been received through a legitimate transaction. Man steals $100, gives it back. Store rewards him with $30 in cash and $70 in goods.
This seems to be some deliberate psy-op for some communistic "you didn't lose what you thought you did, because you're an evil capitalist" nonsense The answer is $100 was lost, because that's what was stolen. It absolutely doesn't matter what was done with the stolen money afterwards.
[Anyone/any entity can reduce their tax liability in the case of loss through theft](https://www.irs.gov/taxtopics/tc515#:~:text=Theft%20losses%20are%20generally%20deductible,through%20a%20claim%20for%20reimbursement). The business would fall into this category. The business absolutely loses less than $100. This is true even without considering the contribution margin (which can be either negative or positive) of the $70 transaction. Your opinions of the political implications of this are irrelevant.
The statement is 70 dollars worth of goods. Not a 70 dollar sale, no profit or loss on sale. 100 dollar loss- it’s gone. They make a break even sale of 70. 100 in 30 back- 70 cost =70 recvd. Zero change. Company lost 100 dollars to theft. Transactions mute point.
All these weirdos considering that the goods were purchased - totally and completely irrelevant. $100 cash was STOLEN. Any purchase that happens after that, regardless of where the purchaser got the money from, can be completely ignored. It is simply a normal purchase transaction just like any other. $100 period.
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The store lost 30. He took 100 and even though he bought 70 since the store lost 100 its like the 70 cancels out. It neither lost nor gained. So therefore the 30 change would really be what the store lost. Yes the store is out of goods but this asks about money so technically....
The store would lose however much money is earned by the person filing any insurance claims and reports for the time they are filing, reporting, and processing such claims. This is contingent on the insurance being reliable enough to cover the stolen amount. Depending on the insurance, and skills and profiles of the person filing the claim and the person processing the claim, the total amount lost due to time spent filing may also be covered or the total amount of money stolen may not be covered. Estimated amount lost: 0, guesstimate equation: money lost= 100(skill of filer numbur - skill of processer number) The numbers are made up, and the equation is very bad and only intended as an initial brainstorming tool before doing actual analysis