Question

Market-share and market-size variances (continuation of 14-38). Miami Infonautics’ senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. Foolinstead Research estimated that the total handheld-organizer market would reach sales of 408,600 units worldwide in the third quarter. However, actual sales in the third quarter were 515,000 units.
1. Calculate the market share and market size variance for Miami Infaunotics int he third quarter of 2017.
2. Explain what happend on the market share and the market size variances.
3. Calculate the actual maket size in units that would that would let to market size variance.

Answer 1

Answer:

See below

Explanation:

1.

Actual Budget Inc(Dec)

Worldwide. $515,000 $408,600 $106,400

Miami infonautics $103,000 $102,150 $850

Market share 20% 25% 5%

Average contribution margin per unit

Actual = $114.82 [ $11,862,460 ÷ 103,000 units]

Budgeted = $115 [ $11,747,250 ÷ 102,150 units]

Market size. $515,000

Share gain (loss) -5%

Unit share gain (loss) ($25,750)

Budgeted composite contribution per unit $115

Market share gain(loss) ($2,961,250)

Market size vs Market budget $106,400

Budgeted market share 25%

Total $26,600

Budgeted composite contribution per unit $115

Market size variance $3,059,000

2.

Here, the actual market size of $515,000 units exceeded the budget size of 408,600 units, leading to a favorable market size variance.

3. With regards to the above, Miami infonautics share of the market fell 25% to 20%, but the substantially favorable market size variance exceeded the unfavorable market share variance resulting in a favorable sales quantity variance overall.

Sales quantity variance $97,250 F

= Market share variance

$2,961,250 U - Market size variance

$3,059,000 F