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Fort Co produces and sells three models of family car. The basic model ( the drastic) , an upgraded model ( the bomber) and a deluxe model ( the cracker) . All of the cars are priced to achieve a 6% markup on standard cost. For the month of June, Fort Co budgeted to sell 30000 units of the Drastic and so have 10% market share of the budgeted sales at a price of $10600 each. Fort Co actually achieved a 15% share of the market , thought the market had actually contracted by 5%
Calculate the market share and size variance for the drastic :
I’m not getting the correct answer. Can you tell me how do we arrive at the answer
For the OBC question asked in December 2015 exam , which one is the correct option for 4th question ? ( confirmation purpose)
Given that there is a 6% markup on cost, the standard profit must be 6/106 x $10,600 = $600 per unit.
The budgeted on selling 30,000 units and therefore they must have been expected sales in the market as a whole to be 30,000/10% = 300,000 units.
The market had contracted by 5%, therefore the actual market sales were 95% x 300,000 = 285,000 units.
A 10% share of this would have been 28,500 units. Therefore the market size variance is 28,500 – 30,000 = 1,500 units (adverse), costed out at the standard profit.They actually had a 15% share, so their actual sales were 15% x 285,000 = 42,750 units. Therefore the market share variance is 42,750 – 28,500 = 14,250 units (favourable), costed out at the standard profit.
The correct answer to the OBC question is the examiners own answer, which you can find on the ACCA website!
I didn’t understand why you have multiplied the original 10% market share with 285000 units ? Another question that I have for you is could you tell me how market share and size differ from each other , or are they related in some way .
I multiplied the actual size of the market by the budgeted market share.
If the overall market size is lower, then they will expect to sell fewer.
If their market share (i.e. their share of the market) is higher, then they will expect to sell more.
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