Market Size and Share Variances TransPacific Airlines (TPA) budgeted 80 million passengermiles, or 5% of the total market for the year just completed, at a contribution margin of 40 cents permile. The budgeted average price was 52 cents per passenger mile.The operating data for the year show that TPA flew 69.12 million passenger miles with an average price of 48 cents per passenger mile. The terrorist activity in the early part of the year in severalcountries in the region decreased the total miles flown by all airlines for the year by 10%. There is noflexible-budget variance for all costs.Required1. In an effort to understand the operating results, you are asked to compute the following:a. Selling price variance.b. Sales volume variance.c. Market size variance.d. Market share variance.2. Explain the risks posed by the global economic environment for TPA, and suggest strategies for mitigating those risks.
Market Size and Share Variances TransPacific Airlines (TPA) budgeted 80 million passenger
miles, or 5% of the total market for the year just completed, at a contribution margin of 40 cents per
mile. The budgeted average price was 52 cents per passenger mile.
The operating data for the year show that TPA flew 69.12 million passenger miles with an average price of 48 cents per passenger mile. The terrorist activity in the early part of the year in several
countries in the region decreased the total miles flown by all airlines for the year by 10%. There is no
flexible-
Required
1. In an effort to understand the operating results, you are asked to compute the following:
a. Selling price variance.
b. Sales volume variance.
c. Market size variance.
d. Market share variance.
2. Explain the risks posed by the global economic environment for TPA, and suggest strategies for mitigating those risks.
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