Question

[The following information applies to the questions displayed below.) Tall Pines Brewery (TPB) makes two specialty beers in its microbrewery: Golden Ale and Dark Ale. Both beers sell for the same price per case in the U.S. market and in the export market. The latter market is primarily European countries. Both beers also have the same variable production costs, though the export product has slightly higher variable costs due to shipping and other distribution costs associated with the export beers. The price, cost, and market information for the two beers are shown below: Budgeted Wt Avg CM Budgeted Actual 38,000 28,000 66,000 38,350 30, 500 68,850 $ 120 129 $ § 119 122 122 Sales units (cases) Domestic Export Total Price per case Domestic Export Variable cost per case Domestic Export Contribution margin per case Domestic Export Total contribution margin Domestic Export $ 78 100 $ 78 CO 42 22 $ O $1,596,000 616,000 $1,572,350 1,220,000 $33.5152 Industry Budget Industry Actual Sales units (cases) Domestic Export 981,500 699,400 1,004,550 709, 750

Answer 1

Variance means the gap between budget and actual.

1. Market Share: Market share is defined as the total sales (in cases) of a company (globally) as compared to the industry (globally). So, to calculate Market Share variance, we will compare budget Market share (globally) of the company with the Actual Market Share of the company (globally).

Budget Market Share = 66,000/ 1,680,900 = 3.9%

Actual Market Share = 68,850/ 1,714,300 = 4.01%

So the Market Share Variance is (4.01 - 3.9%)/ 3.9% = 0.11%/ 3.9% = 2.8% (Increase)

2. Market Size: It is the total Market Size (Industry sales in cases) globally. So, if we need to calculate Market Size variance, we need to compare the Budget Market Size with the Actual Market Size.

Budget Market Size = 1,680,900

Actual Market Size = 1,714,300

Variance = (1,714,300 - 1,680,900)/ 1,680,900 = 1.98%

3. Sales price is calculated in two ways

A. Individually for domestic and exports

B. Weighted average for both combined.

We will use the option B.

So, Budget Sales Price = (38,000 * 120 + 28,000 * 122)/ 66,000 = 120.85$

And Actual Sales Price = (38,350 * 119 + 30,500 * 124)/ 68,850 = 121.21$

So Variance = 0.31%