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14-28 (20 Min.) Market-Share and Market-Size Variances (Continuation of 14-27) - Actual Budgeted

The document presents the market-share variance and market-size variance analysis for Soda King in 2017. It shows an unfavorable market-share variance of $1,199,250 and a favorable market-size variance of $1,121,250, resulting in an unfavorable sales-quantity variance of $78,000. The analysis compares the actual results to the static budget and calculates the variances based on differences in market size and market share.

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90 views3 pages

14-28 (20 Min.) Market-Share and Market-Size Variances (Continuation of 14-27) - Actual Budgeted

The document presents the market-share variance and market-size variance analysis for Soda King in 2017. It shows an unfavorable market-share variance of $1,199,250 and a favorable market-size variance of $1,121,250, resulting in an unfavorable sales-quantity variance of $78,000. The analysis compares the actual results to the static budget and calculates the variances based on differences in market size and market share.

Uploaded by

xer A
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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14-28 (20 min.) Market-share and market-size variances (continuation of 14-27).

Actual Budgeted
Western region 12.3 million 10 million
Soda King 1.23 million 1.25 million
Market share 10% 12.5%

Average budgeted contribution margin per unit = $3.90 ($4,875,000 ÷ 1,250,000).

Solution Exhibit 14-28 presents the sales-quantity variance, market-size variance, and market-
share variance for 2017.

 Actual Budgeted  Budgeted contribution


Market share = Actual market ×  market – market  × margin per composite
variance size in units  share share  unit for budgeted mix

= 12,300,000 × (0.10 – 0.125) × $3.90


= 12,300,000 × 0.025 × $3.90
= $1,199,250 U

 Actual Budgeted  Budgeted Budgeted contribution


Market-size =  market size – market size  × market × margin per composite
variance  in units 
 in units share unit for budgeted mix

= (12,300,000 – 10,000,000) × 0.125 × $3.90

= 2,300,000 × 0.125 × $3.90

= 1,121,250 F

The market share variance is unfavorable because the actual 10% market share was lower than
the budgeted 12.5% market share. The market size variance is favorable because the market size
increased 23% [(12,300,000 – 10,000,000) ÷ 10,000,000].

The unfavorable market-share variance was greater than the increase in market size variance
resulting in an unfavorable sales-quantity variance.

Sales-Quantity Variance
$78,000 U

14-13
Market-share variance Market-size variance
$1,199,250 U $1,121,250 F

SOLUTION EXHIBIT 14-28


Market-Share and Market-Size Variance Analysis of Soda King for 2017
Static Budget:
Actual Market Size Actual Market Size Budgeted Market Size
× Actual Market Share × Budgeted Market Share × Budgeted Market Share
× Budgeted Average × Budgeted Average × Budgeted Average
Contribution Margin Contribution Margin Contribution Margin
Per Unit Per Unit Per Unit
12,300,000 × 0.10a × $3.90b 12,300,000 × 0.125c × $3.90b 10,000,000 × 0.125c × $3.90b
$4,797,000 $5,996,250 $4,875,000
$1,199,250 U $1,121,250 F
Market-share variance Market-size variance
$78,000 U
Sales-quantity variance
F = favorable effect on operating income; U = unfavorable effect on operating income
a
Actual market share: 1,230,000 units ÷ 12,300,000 units = 0.10, or 10%
b
Budgeted average contribution margin per unit $4,875,000 ÷ 1,250,000 units = $3.90 per unit
c
Budgeted market share: 1,250,000 units ÷ 10,000,000 units = 0.125, or 12.5%

14-14
14-35 (30 min.) Cost allocation to divisions.

1.
Bread Cake Doughnuts Total
Segment margin $6,400,000 $1,300,000 $6,150,000 $13,850,000
Allocated headquarter costs
($5,100,000 ÷ 3) 1,700,000 1,700,000 1,700,000 5,100,000
Operating income $4,700,000 $ (400,000) $4,450,000 $ 8,750,000

2.
Bread Cake Doughnuts Total
Segment margin $6,400,000 $1,300,000 $6,150,000 $13,850,000
Allocated headquarter costs,
Human resources1
(50%; 12.5%; 37.5% ×
$1,900,000) 950,000 237,500 712,500 1,900,000

14-15

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