ExpertHard2 marksShort Answer
ACCA · Question 24 · Budgeting and control
Section B - Case 2: AeroLogix
AeroLogix provides drone-based medical delivery. They budgeted to sell 5,000 delivery subscriptions at a standard contribution of $40 each. The total market size was estimated at 50,000 subscriptions (AeroLogix budgeted market share = 10%).
Actually, the total market shrank to 40,000 subscriptions due to regulatory changes. AeroLogix actually sold 4,500 subscriptions.
Calculate the Sales Market Share Variance in terms of contribution. (Enter your answer as a positive number for adverse, or negative for favorable).
Section B - Case 2: AeroLogix
AeroLogix provides drone-based medical delivery. They budgeted to sell 5,000 delivery subscriptions at a standard contribution of $40 each. The total market size was estimated at 50,000 subscriptions (AeroLogix budgeted market share = 10%).
Actually, the total market shrank to 40,000 subscriptions due to regulatory changes. AeroLogix actually sold 4,500 subscriptions.
Calculate the Sales Market Share Variance in terms of contribution. (Enter your answer as a positive number for adverse, or negative for favorable).
How to approach this question
1. Calculate actual market share (4,500 / 40,000). 2. Compare actual market share to budgeted market share (10%). 3. Apply the difference in market share to the actual total market size to find the difference in units. 4. Multiply by standard contribution per unit.
Full Answer
Budgeted market share = 10%.
Actual total market = 40,000.
Expected sales based on actual market size (maintaining 10% share) = 40,000 * 10% = 4,000 units.
Actual sales achieved = 4,500 units.
Difference due to market share = 4,500 - 4,000 = 500 units Favorable.
Sales Market Share Variance = 500 units * $40 standard contribution = $20,000 Favorable.
Since the prompt asks for negative for favorable, the answer is -20000.
Common mistakes
Calculating the total sales volume variance or the market size variance instead of the market share variance.
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