Consider the following information for Morgan’s Cheese and Butter Division.

Additional information:

Budgeted market size for cheese and butter .............................. 65 000 000 kg
Actual market size for cheese and butter ..................................... 60 000 000 kg
Budgeted selling price* .................................................................. $4.00
Budgeted cost of goods sold per kg .............................................. $3.00
Actual selling price* ........................................................................ $4.50
Actual cost of sales per kg ............................................................. $3.25

Required

(a) Calculate the market size and market share variances.

(b) Comment on the meaning of your calculations (for example, how these help Morgan’s management evaluate performance).

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Budgeted Budgeted volume (kg) Flexible Actual Actual sales $ Variance budget Variance volume (kg) 22 000 000 2750 000 14 060 870 (1 701 630) 7939 130 1048 370 sales $ 5500 000 24750 000 4 850 000* 15762 500 8987 500 Sales data 5 750 000 23000 000 Cost of sales 4900 000* 14700 000 Contribution margin Operating costs 8 300 000 (360 870) 3000 000 3 000 000 500 000 3 500 000 Profit 5300 000 (360 870) 4939 130 548 370 5 487 500