Mkt size and mkt share variance doubt

I am puzzled why you are asking me this – surely if you have the question you also have the Kaplan answer?

They must have budgeted on a market share of 18% (20 – 2) and so they were expecting total sales in the market as a whole of 504,000 / 18% = 2,800,000.

The market contracted by 5% – so sales in the market as a whole were 2,800,000 x 95% = 2,660,000.
Market share was 20%, so their actual sales were 20% x 2,660,000 = 532,000.

The variances should now be fairly obvious from the Kaplan answer, but if not then tell me which bit of the answer is giving you a problem and I will try and help.

For market size variance:

If our share had stayed at 18%, then with the fall in the market sales to 2,660,000 our sales would have been 18% x 2,660,000 = 478,800.

We had budgeted on selling 504,000, and so the market size variance is (478,800 – 504,000) x $12.

For market share variance:

If our share has stayed at 18% we would have sold 478,800 (as above). We actually sold 532,000 (see my previous reply) and so the market share variance is (532,000 – 478,800) x $12

Thank you 🙂

Thank you 🙂