The correct answer is: C. Reduces to powder.
Dry rot is a type of fungal decay that affects timber. It is caused by a fungus called Serpula lacrymans, which thrives in damp conditions. The fungus attacks the cellulose in the timber, causing it to rot and crumble. As the timber rots, it shrinks and cracks, and eventually reduces to powder.
Option A is incorrect because dry rot does not cause timber to crack. Option B is incorrect because dry rot does not cause timber to shrink. Option D is incorrect because dry rot does cause timber to reduce to powder.