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I don’ t understand the answer to the following question(it is answer from study text), so my question is:
Why the chcange in market share don’t influence our computation, How I shoud treat this change?
with which variance market share change is connected?PG budgeted sales for 20X8 were 5,000 units. The standard contribution is $9.60 per unit. A recession in
20X8 meant that the market for PG’s products declined by 5%. PG’s market share also fell by 3%. Actual
sales were 4,500 unitsRequired
Calculate planning and operational variances for sales volume.Planning variance
Units
Original budgeted sales 5,000
Revised budget sales (–5%) 4,750
250 A
@ Contribution per unit of $9.60 $2,400Operational variance
Units
Revised budget sales 4,750
Actual sales 4,500
250 A
@ Contribution per unit of $9.60 $2,400thank you for reply.
If the market share had stayed the same, then the sales would have fallen by 5% to 4750.
However the actual sales we are told are 4500 – the fact that they are less than 4750 must be because of the fall in market share.
So…..the fall in market share has not been ignored. It is simply that we do not need the 3% because we are told what the actual sales are.
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