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14-35 (15 min.)  Market-share and market-size variances

(continuation of 14-34).

1.

Actual

Budgeted

Chicago Market

Debbie's Delight

Market share

960,000

120,000

0.125

1,000,000

100,000

0.100

The budgeted average contribution margin per unit (also called budgeted contribution margin per composite unit for budgeted mix) is $2.35:

Budgeted

Contribution

Margin per

Pound

Budgeted

Sales Volume

in Pounds

Budgeted

Contribution

Margin

Chocolate chip

Oatmeal raisin

Coconut

White chocolate

Macadamia nut

All cookies

$2.00

2.30

2.60

3.00

3.10

45,000

25,000

10,000

5,000

 15,000

100,000

$  90,000

57,500

26,000

15,000

   46,500

$235,000

==  $2.35

=× ×

=(960,000 – 1,000,000) × 0.100 × $2.35

=$9,400 U

=× ×

=960,000 × (0.125 – 0.100) × $2.35

=$56,400 F

By increasing its actual market share from the 10% budgeted to the actual 12.50%, Debbie's Delight has a favorable market-share variance of $56,400.  There is a smaller offsetting unfavorable market-size variance of $9,400 due to the 40,000 unit decline in the Chicago market (from 1,000,000 budgeted to an actual of 960,000).

14-35 (Cont’d.)

Solution Exhibit 14-35 presents the sales-quantity, market-share, and market-size variances for Debbie’s Delight Inc. in August 2003.

14-48

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