Market-Share Variance

The market-share variance is the difference in budgeted contribution margin for actual market size in units caused solely by actual market share being different from budgeted market share. The formula for computing the market-share variance is shown below:

Market-sharevariance=Actualmarket sizein units×(Actualmarketshare−Budgetedmarketshare)×Budgeted contributionmargin per composite unitfor budgeted mix=800,000 units×(0.1875−0.20)×$245 per unit=$2,450,000 U

The Provalue Division lost 1.25 market-share percentage points—from the 20% budgeted share to the actual share of 18.75%. The $2,450,000 U market-share variance is the decline in contribution margin as a result of those lost sales.