Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 19

Industry Volume and Market Share Variances

Kay’s Auto Products budgeted sales of 50,000 units of product B, assuming that the company would have 20 percent of 250,000 units sold in a particular market. The actual results were 45,000 units, based on a 15 percent share of a total market of 300,000 units. The budgeted contribution margin is $4 per unit.

Required

Compute the sales activity variance, and break it down into market share and industry volume.

Step 1 of 3

Cost accounting

This system is designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.

Cost variances

Cost variance is the difference between actual quantities (AQ) multiplied with actual price (AP) and standard quantities (SQ) multiplied with standard price (SP).