Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and CD. The following data are provided for the current fiscal year:

The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the year is 32,000 bushels.
What is the firm's market share variance?
A) $0.
B) $560 favorable.
C) $8,000 favorable.
D) $1,225 favorable.
E) $10,500 favorable.

Question

Wheat Inc. has an exclusive contract with an exporter. Two brands of wheat are imported, labeled AB and CD. The following data are provided for the current fiscal year:

The total market was estimated to 40,000 bushels at the time of budget. The actual total market for the year is 32,000 bushels.
What is the firm's market share variance?
A) $0. 
B) $560 favorable. 
C) $8,000 favorable. 
D) $1,225 favorable. 
E) $10,500 favorable.

Quizplus · Accepted Answer

The formula for market share variance is as follows:

Market Share Variance = Budgeted Market Share - Actual Market Share x Actual Total Market

The budgeted market share can be calculated by adding the percentage of imported wheat labeled AB and CD.

Budgeted Market Share = 45% + 30% = 75%

Actual Market Share = (10,000 + 9,000) / 32,000 = 59.38%

Market Share Variance = 75% - 59.38% x 32,000 = $8,000 favorable.

Therefore, the best choice is C.

Wheat Inc Has an Exclusive Contract with an Exporter