Space Infonautics’ senior vice president of marketing prepared his budget at the

beginning of the third quarter assuming a 25% market share based on total sales. Star
Research estimated that the total handheld-organizer market would reach sales of
444,000 units worldwide in the third quarter. However, actual sales in the third quarter
were 500,000 units.

1. Calculate the market-share and market-size variances for Space Infonautics in the
third quarter of 2017 (calculate all variances in terms of contribution margins).

2. Explain what happened based on the market-share and market-size variances.

3. Calculate the actual market size, in units, that would have led to no market-size
variance (again using budgeted contribution margin per unit). Use this market-size
figure to calculate the actual market share that would have led to a zero market-share
variance.

(20 min.) Market-share and market-size variances (continuation of 14-38).

1.
Actual Budgeted
Worldwide 500,000 444,000
Space Infonautics 115,000 111,000
Market share 23% 25%

Average contribution margin per unit:

Actual = $111.66 ($12,840,900  115,000 units)
Budgeted = $125.10 ($13,886,100  111,000 units)

Budgeted
Actual  Actual Budgeted  contribution margin
Market-share
variance = market size   market  market   per composite unit
in units  share share  for budgeted mix
= 500,000  (0.23 – 0.25)  $125.10
= 500,000  (–0.02)  $125.10
= $1,251,000 U

Budgeted
 Actual Budgeted  Budgeted
contribution margin
Market-size  market size  market size   market 
variance =  in units in units  share per composite unit
 for budgeted mix
= (500,000 – 444,000)  0.25  $125.10
= 56,000  0.25  $125.10
= $1,751,400 F
Solution Exhibit 14-39 presents the market-share variance, the market-size variance, and the
sales-quantity variance for the third quarter 2017.