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Sir, I came across this question in Kaplan exam kit:
Leaf Ltd. has had a mixed year. Its market share has improved 2 percentage points to 20% but the overall market had contracted by 5% in the same period. the budgeted sales were 504000 units and the standard contribution was $12 per unit.
Requirements are:
1- What is the level of actual sales?
2- What is the sales market size variance?
3- What is the sales market share variance?I couldn’t get the answer for the first part and the other questions are connected to the first part of the question. Could you help me out to understand this question?
The budgeted sales were 504,000, and then the budget was prepared they were expecting this to be 18% (20 – 2) of the expected total sales of the whole market.
So the sales of the whole market must have been expected to be 504,000 / 18% = 2,800,000.
However the market contracted by 5% and so the actual sales of the whole market were only 95% x 2,800,000 = 2,660,000.
Also, Leaf’s market share was actually 20% and so their actual sales must have been 20% x 2,660,000 = 532,000 units.
The rest of the solution in your Exam Kit will hopefully now make sense 🙂
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