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14-33 (Cont’d.)

Solution Exhibit 14-33 presents the market-share variance, the market-size variance, and the sales-quantity variance for Third Quarter 2004.

SOLUTION EXHIBIT 14-33

Market-Share and Market-Size Variance Analysis of Aussie Infonautics for Third Quarter 2004

Static Budget: Actual Market SizeActual Market SizeBudgeted Market Size Actual Market Share Budgeted Market Share Budgeted Market Share Budgeted Average Budgeted Average Budgeted Average Contribution MarginContribution MarginContribution Margin Per UnitPer UnitPer Unit

500,000 0.22a $130.75b500,000 0.25c $130.75 b400,000 0.25c $130.75b

$14,382,500$16,343,750$13,075,000

$1,961,250 U$3,268,750 F

Market-share varianceMarket-size variance

$1,307,500 F

Sales-quantity variance

F = favorable effect on operating income; U = unfavorable effect on operating income

aActual market share: 110,000 units ÷ 500,000 units = 0.22, or 22%

bBudgeted average contribution margin per unit $13,075,000 ÷ 100,000 units = $130.75 per unit

cBudgeted market share: 100,000 units ÷ 400,000 units = 0.25, or 25%

2.  While the market share declined (from 25% to 22%), the overall increase in the total market size meant a favorable sales-quantity variance:

Sales-Quantity Variance

$1,307,500 F

Market-Share Variance

Market Size Variance

$1,961,250 U

$3,268,750 F

14-42

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