Twitter Company manufactures a remote control device for home theaters. The following data were from the operating period just completed: $\begin{array}{lll}\text { Actual market size (units) } & 12,000 \
\text { Budgeted market size (units) } & 11,000 \
\text { Actual market share } & 15 \% \
\text { Budgeted market share } & 12 \%\
\text { Budgeted selling price per unit } & \$ 60 \
\text { Actual selling price per unit } & \$ 55 \
\text { Budgeted variable cost per unit } & \$ 30 \
\text { Actual variable cost per unit } & \$ 18
\end{array}$What is the firm's market size variance?
A) $2,440 favorable.
B) $3,600 favorable.
C) $5,550 favorable.
D) $6,000 favorable.
E) $6,300 favorable.

Question

Twitter Company manufactures a remote control device for home theaters. The following data were from the operating period just completed: $\begin{array}{lll}\text { Actual market size (units) } & 12,000 \
\text { Budgeted market size (units) } & 11,000 \
\text { Actual market share } & 15 \% \
\text { Budgeted market share } & 12 \%\
\text { Budgeted selling price per unit } & \$  60 \
\text { Actual selling price per unit } & \$  55 \
\text { Budgeted variable cost per unit } & \$  30 \
\text { Actual variable cost per unit } & \$ 18
\end{array}$What is the firm's market size variance?
A) $2,440 favorable.
B) $3,600 favorable.
C) $5,550 favorable.
D) $6,000 favorable.
E) $6,300 favorable.

Quizplus · Accepted Answer

The market size variance is calculated as the difference between the actual and budgeted market size, multiplied by the budgeted market share and the budgeted contribution margin per unit. The budgeted contribution margin per unit is the difference between the budgeted selling price and the budgeted variable cost per unit, which is $60 - $30 = $30. The actual market size is 12,000 units, and the budgeted market size is 11,000 units, so the difference is 1,000 units. The budgeted market share is 12%, so the variance in units due to market size is 1,000 units * 12% = 120 units. Therefore, the market size variance in dollars is 120 units * $30 = $3,600 favorable.

Twitter Company Manufactures a Remote Control Device for Home Theaters