Note : As specifically asked Help with 3 and 4, answered for the same only
3.
Values as provided in the issue
Budgeted for month | Actual for Month | |||||
Product | Welcome Sign | Bird House | Total | Welcome Sign | Bird House | total |
units | 50 | 25 | 75 | 45 | 35 | 80 |
Sales | 1000 | 250 | 1250 | 675 | 420 | 1095 |
V/c | -890 | -120 | -1010 | -580 | -270 | -850 |
Contribution | 110 | 130 | 240 | 95 | 150 | 245 |
F/c | -75 | -75 | -150 | -75 | -75 | -150 |
Profit | 35 | 55 | 90 | 20 | 75 | 95 |
Market | 500 | 200 | 700 | 500 | 175 | 675 |
Calculation of market share
Budgeted market share | Actual Market Share | ||||||
Product | Diane's Design | Market | Share | Product | Diane's Design | Market | Share |
A | B | C | D=B/C | A | B | C | D=B/C |
Welcome Sign | 50 | 500 | 10.00% | Welcome Sign | 45 | 500 | 9.00% |
Bird House | 25 | 200 | 12.50% | Bird House | 35 | 175 | 20.00% |
Weighted Average Budgeted Contribution Margin Per Unit : | |||||
= Budgeted contribution margin per unit for both products/ Budgeted sales per unit for both products | |||||
= 240/75 | |||||
= 3.2 |
Market size Variance
Market size variance | =[(Actual Industry Sales in Units – Budgeted Industry Sales in Units) x Budgeted Market Share Percentage] x Budgeted Average Unit Contribution Margin. | ||||||
Welcome Sign | =[(500-500) x 10.00%] x 3.2 |
= 0 |
Bird House | = [(175-200) x 12.50%] x 3.2 |
=10 unfavorable |
4. Possible reason for the above variance
Diane’s market size for Welcome Signs remain unchanged while total market for Bird House decreased from budgeted 200 units to actual 175 units . While Diane’s market share for Welcome Signs decreased while it did very well for Birdhouses.
Yet Diane able to sold more units (i.e 80-75 = 5 units).Hence possible reasons for the same may includes changes in quality, price, and seasonal variations etc..
Help with 3 and 4, please. Market Size and Market Share Variances for Small Business Diane's...
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