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could you please explain how to solve the following question.
Fort co. produces and sells three models of cars. the basic model the upgraded model and the upgraded model. all cars are priced to achieve 6% mark-up on standard cost. for the month of June, fort co has budgeted to sell 30,000 units of the basic model and so have 10% market share of the budgeted sales at a price of $10600 each. Fort co actually achieved 15% market share of the market, though the market had actually had contracted by 5%.
calculate the market share and market size variance.the answers for the following question are as follows,
market size variance = $900,000 adv
market share variance = $8,550,000 favWhen preparing the budget, they expected the market size to be 30,000/10% = 300,000.
The actual market size was 300,000 – 5% = 285,000.
Therefore their actual sales will have been 15% x 285,000 = 42,750
This is 12,750 more than their budgeted sales.
On the market size of 285,000 they should have had sales of 10% x 285,000 = 28,500.
Therefore the market size variance is 28,500 – 30,000 = 1,500 (adverse), costed at the standard profit per unit of $600.
The market share variance is 42,750 – 28,500 = 14,250 (favourable), costed at the standard profit per unit go $600.
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