Page 106 - 5.2 i. Manac Costing ITC Summarised Notes

STANDARD COSTING

Market size variance

• Market size variance and market share variance

are two ways of using market data to determine

its effect on a company's profits. While the two

terms are related, they calculate the effects of

different changes.

• The market size variance can quantify the

effects of a change in market size on

profitability, assuming that the company's

market share stays the same. The formula for

calculating market size variance is:

Market size variance = ( Actual market size – Expected

market size) x Market share x Profit margin per unit

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