MTC question answers PDF

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This is the answer to the MTC question of the May June 21...

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(a) Market size and market share variances form part of the sales volume variance. It is the measure of the change in profit as a result as a difference between actual and budgeted sales quantity. Market size variance refers to the change in a company's size in the market. It is the variance between the budgeted and actual sales considering constant market share. Market share variance refers to the change in a company's share in the market. It is the variance between the revised sales budget and actual sales. Help businesses to assess the extent profit varies due to changes in market size or market share.

(b) Rolling budgets- based on maintaining market share Quarter 1 Quarter 2 $m $m Size of national market for supply of temporary nurses Size of national market for supply of temporary doctors

14 8

Shortage of full time nurse Std con margin MTC market share Nurse Doctor Budgeted contribution

18.9 8.2

80% Q1- $m 30% 40%

Q2- $m 4.2 3.2

Q1

Nurse Doctor

3.36

5.67 3.28 Q2

3.36 2.56 Nurse

Budgeted cont

Simple marke t rate Nurse $1,000 per week Doctor $2,000

4.536 2.624

Doctor 2.56 Actual cont

5.3 3.6

4.24 2.88

Doctor 2.88

4.536

2.624

-0.296

0.256

Actual cont> budgeted = Fa Actual cont< budgeted = Ad Total market share variance

-0.04

4.536

2.624 Revised bud get cont

Variance

-1.176

-0.064 Variance

-1.24 F

Nurse

75%

4.24

Revised budget cont

Revised cont> budgeted = Favourable Revised cont< budgeted = Adverse Total market size variance =

Act con margi Actual share Q2- $m Nurse Doctor Act result at s Q2- $m td cont Nurse Doctor

(c) The sales director at Cheat Co manipulated the market size making it looking smaller from 18900 and 4100 weekly contracts for By making the market looking smaller, the performance of Cheat co might appear to be very favorable leading to bonuses and praises to the sales director. This is unethical and can be harmful for the company in the long term....