The following data relate to both questions (a) and (b). A company has budgeted to produce and
Question:
The following data relate to both questions (a) and (b). A company has budgeted to produce and sell 15 000 units per annum of a single product. The budgeted market size for this product is 75 000 units per annum. The budgeted information per unit is as follows:
...........................................£
Selling price ...................125
Standard cost:
Direct materials ...............20
Direct labour ....................15
Variable overhead ...........10
Fixed overhead .................5
Standard profit ................75
In the period covered by the budget, the following actual results were recorded:
Production and sales ..................13 000 units
Industry sales .............................10 percent lower than previously forecast
(a) The market size variance, calculated on a contribution per unit basis is:
(A) £40 000 adverse
(B) £40 000 favourable
(C) £120 000 adverse
(D) £120 000 favourable
(E) £160 000 adverse
(b) The market share variance, calculated on a contribution per unit basis is:
(A) £40 000 adverse
(B) £40 000 favourable
(C) £120 000 adverse
(D) £120 000 favourable
(E) £ 160 000 favourable
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