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Hi John,
I am struggling on the following question:
Leaf Limited has had a mixed year. It’s market size has improved two percentage points to 20% but the overall market had contracted by 5% in the same period. The budgeted sales were 504,000 units and standard contribution was $12 per unit.
The first questions asks:
What is the level of actual sales?
They have set out the answer like this:Sales 504,000 532,000 Up 5.55%
Market Share 18% 20% Up 2%
Market Size 2,800,000 2,660,000 Down 5%I struggled to get the answer but I saw on another forum you had answered how to get to it. This gives the answer however I wanted to know how do you get to the Market Size figures in the bottom row? I can see that 2,800,000 is 5 times 504,000. But i am not sure where that comes from. I don’t really understand it would you be able to explain please?
Also I have come to do the second question which is what is the sales market size Variance.
In the table the revised units are 478,800. I am not sure how to get to that figure either?
I think its safe to say i am struggling a bit with the terms market share and market size.
Thanks
If they budgeted on sales of 504,000, and expected market share of 18%, then they were expecting the market as a whole to have sales of 504,000/18% = 2,800,000.
The market contracted by 5%, so the actual market size was 95% x 2,800,000 = 2,660,000, and they would then have expected to sell 18% x 2,660,000 = 478,800
However, their actual share of the market was 20%, and so the actual sales were 20% x 2,660,000 = 532,000
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