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Tasty Tea Ltd. (TTL) has an exclusive contract with a distributor of high-quality green tea. Two brands of green tea, Longjing and Biluochun, are
Tasty Tea Ltd. (TTL) has an exclusive contract with a distributor of high-quality green tea. Two brands of green tea, Longjing and Biluochun, are imported and sold to retail outlets in 100-gram packages. The monthly budget for the contract is based on a combination of forecasted industry sales of 500,000 packages and TTL's expected share of 5% the Canadian market for green tea. Industry sales were 600,000 packages in February, and TTL's operating information for February was as follows: Budgeted Actual Longjing Biluochun Longjing Biluochun Price per package $24.00 $32.00 $22.00 $35.00 Variable cost per package $ 9.00 $12.00 $ 8.00 $13.00 Contribution margin per $15.00 $20.00 $14.00 $22.00 package Sales (packages) 10,000 15,000 9,000 18,000 Required: a) Calculate the following variances for February: 1. Market share variance (2 marks) ii. Market size variance (2 marks) b) Briefly explain the results of each of the variance calculations in part (a). (1 mark)
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