Market share and market size variance

Market share and market size variance: the split of the sales-quantity variance into the effect of the whole market growing or shrinking and the effect of the firm gaining or losing its slice of it.

ByHoang TruongUpdated July 11, 2026

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The industry's total market grew from 100,000 to 110,000 units while the company's share rose from a budgeted 20% to an actual 22%, on a €5 budgeted contribution margin. The market size effect, holding share at the budgeted 20%, contributes €10,000. The market share effect, holding the market at its actual 110,000 units, contributes €11,000. Together they reconcile to the full €21,000 sales-quantity variance.

Where it fits

SubjectManagerial AccountingAdvancedTopicStandard Costing & Variance AnalysisAdvanced

The formula

LaTeX

V_1 = (M - N) \cdot s \cdot c

Variables

$V_{1}$: Market size variance (€)
$M$: Actual total market (units)
$N$: Budgeted total market (units)
$s$: Budgeted market share (%)
$c$: Budgeted contribution margin per unit (€)

Isolates the effect of the whole market growing or shrinking, holding the company's market share at the budgeted level.

LaTeX

V_2 = (t - s) \cdot M \cdot c

Variables

$V_{2}$: Market share variance (€)
$t$: Actual market share (%)
$s$: Budgeted market share (%)
$M$: Actual total market (units)
$c$: Budgeted contribution margin per unit (€)

Isolates the effect of the company gaining or losing share, holding the total market at its actual size.