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14-33 (Cont’d.)

3.

The required actual market size is the budgeted market size, i.e., 400,000 units.  This can easily be seen by setting up the following equation:

= (M – 400,000) × 0.25 × $130.75

When M = 400,000, the market-size variance is $0.

Actual Market-Share Calculation

Again, the answer is the budgeted market share, 25%.  By definition, this will hold irrespective of the actual market size.  This can be seen by setting up the appropriate equation:

Actual Market Size × (M – 25%) × $130.75 = $0

     When M = 25%, the market-share variance is $0.

14-43

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