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Hi,
The question asking for planning(market size)and operating sales(market share)
There are Q 1 anQ2 sales
Do we have always to consider that rolling budget is the revised sales and the original budget is the budgeted sales??
Even the question stating clearly Q1 an Q2
but in the answer Q1 is considered as a budgeted sales for Q2
Can you please clarify more.
Thanks.
John has answered this before so here we go:-
The question says that when the budgeted for quarter 2 they assumed that they would maintain the share of the market that it had in quarter 1.
In quarter 1 the market was for 14,000 nurses and their share was 30%, so they will have budgeted on 30% x 14,000 = 4,200 in quarter 2.
It turned out that in quarter 2 the actual size of the market was 18,900 nurses and so they should really have expected 30% x 18,900 = 5,670.
The difference of 1,470 is due to the change in the market size and therefore the market size variance is 1,470 x the standard contribution of 80% = $1,176 favourable, and is a planning variance.
So they should have expected to supply 5,670 nurses, but they actually supplied 5,300. So the difference of 370 is due to a change in their market share and therefore the market share variance is 370 x the standard contribution of 80% = $296 adverse, and is an operational variance.
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