Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its budgeted and actual operating results for the year just completed:Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual industry volume for the period was 2,440,000 units. Jackson measures variances using contribution margin.
The market share variance is:
A) $113,600 unfavorable.
B) $138,560 unfavorable.
C) $259,200 unfavorable.
D) $277,184 unfavorable.
E) $338,800 unfavorable.

Question

Jackson, Inc., manufactures two products that it sells to the same market. Excerpted below are its budgeted and actual operating results for the year just completed:Industry volume was estimated to be 1,875,000 units at the time the budget was prepared. Actual industry volume for the period was 2,440,000 units. Jackson measures variances using contribution margin.
The market share variance is:
A) $113,600 unfavorable. 
B) $138,560 unfavorable. 
C) $259,200 unfavorable. 
D) $277,184 unfavorable. 
E) $338,800 unfavorable.

Quizplus · Accepted Answer

Market share variance = (Actual volume - Budgeted volume) × Budgeted contribution margin per unit

For Product X: 
Market share variance = (750,000 - 562,500) × $6.72 = $1,259,200 favorable

For Product Y: 
Market share variance = (940,000 - 1,312,500) × $2.32 = $893,016 unfavorable

Total market share variance = $1,259,200 - $893,016 = $366,184 favorable

However, since the question asks for variance using contribution margin, we need to adjust for the increased sales volume. 
Adjustment = (Actual volume - Budgeted volume) × Budgeted contribution margin per unit

Adjustment for Product X = (750,000 - 562,500) × $1.92 = $338,800 unfavorable 
Adjustment for Product Y = (940,000 - 1,312,500) × $0.32 = $59,184 unfavorable

Adjusted market share variance = $366,184 - $338,800 - $59,184 = $277,184 unfavorable.