The operating revenues of the five largest business segments for Time Warner, Inc., for a recent year are shown below. Each segment includes a number of businesses, examples of which are indicated in parentheses.
Time Warner, Inc.
Segment Revenues
(in millions)
AOL ................... $ 5,161
Cable (TWC, Inc.) ............. 15,940
Filmed Entertainment (Warner Bros.) ...... 11,099
Networks (CNN, HBO, WB) .......... 9,354
Publishing (Time, People, Sports Illustrated) ... 4,928
Assume that the variable costs as a percent of sales for each segment are as follows:
AOL ............... 18%
Cable .............. 18%
Filmed Entertainment ....... 30%
Networks ............. 25%
Publishing ............. 70%
a. Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percent’s) for each segment from the above information.
b. Why is the contribution margin ratio for the Publishing segment smaller than for the other segments?
c. Does your answer to (b) mean that the other segments are more profitable businesses than the Publishing segment?