Page 7 - MAC4861_2 Unisa Test 4 slides - additional
P. 7

STANDARD COSTING


            Market size and market share relationship



            • So, for our hypothetical company, changes in the size of


                the market caused gross profits to be R100,000 greater

                than expectations, while changes in the company's

                market share caused gross profits to fall by R120,000. In

                all, these two variances combined to produce a gross


                profit that is R20,000 less than the company's

                expectations.


            • Using information from the market size variance


                example, the company expected to sell 22,000 units at a

                total profit of R1,100,000. However, due to the market

                size variance and market share variance, the actual

                profit is R20,000 less, or R1,080,000.









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