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Hi sir,
Question;
Leaf its market share has improved 2 percentage points to 20% but the overall market had contracted by 5% in the same period. Budget sales were 504000 units and contribution of £12 p/u.
The sales market size variance is;
A) 1680,000 fav
B)1680,000adv
C) 302,400 adv
D) 302,400 favThe answer is D.
I don’t understand how they calculate the sales units? For revised and actual units?Thank you in advance.
The budget assumed that the market share was 20 – 2 = 18%.
Therefore they expected the market as a whole to be 504,000 / 18% = 2,800,000 units.
The market contracted by 5% so the actual size of the market was 95% x 2,800,000 = 2,660,000 units.
The actual market share was 20% and therefore Leaf must have sold 20% x 2,660,000 = 532,000.
For market size variance:
If their share had stayed at 18%, then with the fall in the market sales to 2,660,000 their sales would have been 18% x 2,660,000 = 478,800.
They had budgeted on selling 504,000, and so the market size variance is (478,800 – 504,000) x $12.
For market share variance:
If their share had stayed at 18% they would have sold 478,800 (as above). They actually sold 532,000 and so the market share variance is (532,000 – 478,800) x $12
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