Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 20

Market Size and Market Share Variances; Foreign Currency Fluctuations Tall Pines Brewery (TPB) makes two specialty beers in its microbrewery: Golden Ale and Dark Ale. Both beers sell for the same price per case in the U.S. market and in the export market. The latter market is primarily European countries. Both beers also have the same variable production costs, though the export product has slightly higher variable costs due to shipping and other distribution costs associated with the export beers. The price, cost, and market information for the two beers are shown below.

The budget was prepared with the expectation that the currency exchange rate would be $1.29 per euro. The actual average exchange rate for the period reflected the falling dollar, at $1.42 per euro.
Required (round all calculations to 4 decimal places after the decimal point)
1. What is the market share variance
2. What is the market size variance
3. Explain possible reasons for these variances, including a consideration of the effect of the change in the currency exchange rate for the dollar and the euro.