New York sales 2,500,000 units 2,000,000 units

Campbell Corp. 200,000 units 220,000 units

Market share 8%
11%

Average budgeted contribution margin per unit = ($4 × 88,000 + $5 × 132,000) ÷ 220,000
= ($352,000 + 660,000) ÷ 220,000 = $4.60

Solution Exhibit Try It 14-5 presents the sales-quantity variance, market-size variance, and
market-share variance for 2017.

 Actual Budgeted  Budgeted contribution

Market share Actual market  market market  margin per composite
 share share 
variance = size in units   –  unit for budgeted mix

= 2,500,000 × (0.08 – 0.11) × $4.60

= 2,500,000 × 0.03 × $4.60
= $345,000 U

 Actual Budgeted  Budgeted Budgeted contribution

Market-size  market size market size  market margin per composite
 in units in units 
variance =  –  share  unit for budgeted mix
= (2,500,000 – 2,000,000) × 0.11 × $4.60
= 500,000 × 0.11 × $4.60
= 253,000 F

The market share variance is unfavorable because the actual 8% market share was lower than the
budgeted 11% market share. The market size variance is favorable because the market size
increased 25% [(2,500,000 – 2,000,000) ÷ 2,000,000]. Campbell Corporation should be
concerned about its performance because the unfavorable sales volume variance of $102,000 U
and the unfavorable sales-quantity variance of $92,000 U occurred despite the fact that the
market grew substantially. Campbell should investigate why its market share dropped so much.

The unfavorable market-share variance was greater than the increase in market size variance
resulting in an unfavorable sales-quantity variance.

Sales-Quantity Variance
$92,000 U

Market-Share Variance Market Size Variance

$345,000 U $253,000 F
Solution Exhibit Try It! 14-5

Market-Share and Market-Size Variance Analysis of Campbell Corp. for 2017

Static Budget:
Actual Market Size Actual Market Size Budgeted Market Size
 Actual Market Share  Budgeted Market Share  Budgeted Market Share
 Budgeted Average  Budgeted Average  Budgeted Average
Contribution Margin Contribution Margin Contribution Margin
Per Unit Per Unit Per Unit
2,500,000  0.08a  $4.60b 2,500,000  0.11c  $4.60b 2,000,000  0.11c  $4.60b
$920,000 $1,265,000 $1,012,000
$345,000 U $253,000 F
Market-share variance Market-size variance
$92,000 U
Sales-quantity variance
F = favorable effect on operating income; U = unfavorable effect on operating income
a
Actual market share: 200,000 units ÷ 2,500,000 units = 0.08, or 8%
b
Budgeted average contribution margin per unit $1,012,000 ÷ 220,000 units = $4.60 per unit
c
Budgeted market share: 220,000 units ÷ 2,000,000 units = 0.11, or 11%