Measuring Productivity 207Market Effects
“The rise in volume may or may not be attributable to good management. One
possibility is that it was driven by an increase in the total market. For instance,
one can imagine the larger market to have an expected 8,000 units in sales. The
company was expecting to get 12.5% of the market. If one now assumes that
the market grew to 12,000 units, then the company’s sales of 1,200 units actu-
ally represents a decrease in market share. Writing this out more formally:
In other words, given this scenario, the sales staff really should be queried on
why they had a decrease of 20% in market share in a market that increased
50%.”
Summary
“Finally, let’s try to summarize what we have learned to this point. First, note
that Panel B confirms that the price index in any variance computation can be
derived by dividing the actual figure by the f lexible budget figure. Panel C
demonstrates that the activity index can be derived by dividing the f lexible fig-
ure by the static figure. In short, the relationship between the overall index of
the change from budget to actual is given by:
To summarize, then, in the example shown in Exhibits 7.1 and 7.2, one has the
following relationships connecting the actual results back to the static, through
the f lexible budget:
Overall Index Price Index Activity Index
Revenue:
Variable Cost:
Fixed Cost:=×
=×
=×
=×115 096 120
107 089 120
117 117 100...
...
...Overall IndexActual
Static
Actual
FlexibleFlexible
Static
Price Index Activity Index==
×
=×Sales Activity Index==×
×=
×
=×1 200
1 000
10 12 000
12 5 8 000
10
12 512 5
8 000
080 150,
,
(% , )
(.% , )
%
.%.%
,
..