The Walt Disney Company (DIS) is a global entertainment company that is organized into four business segments
Question:
The Walt Disney Company (DIS) is a global entertainment company that is organized into four business segments as follows:
Media Networks:
Television production and distribution, including ABC television network, ESPN, National Geographic.
Parks, Experiences, and Products:
Theme parks and resorts, including Walt Disney World and Disneyland; Experiences, including Disney Cruise Line and Disney Vacation Club; Products, including Disney and Pixar characters, comic books, and magazines.
Studio Entertainment:
Music and motion picture production and distribution, including Twentieth Century Studios, Marvel, and Lucasfilm.
Direct-to-Consumer & International:
Streaming services, including Disney+, ESPN+, and Hulu.
For a recent year, Disney reported the following segment results (in millions):
Line Item Description | Segment Media Networks | Segment Parks, Experiences, and Products | Segment Entertainment | Direct-to-Consumer & International |
---|---|---|---|---|
Revenues | $28,393 | $16,502 | $9,636 | $16,967 |
Operating expenses | (19,371) | (16,583) | (7,135) | (19,773) |
Operating income | $9,022 | $(81) | $2,501 | $(2,806) |
Assume the following percentages of total operating expenses for each segment are variable:
Segment | Percentage of Variable Operating Expenses |
---|---|
Media Networks | 75% |
Parks, Experiences, and Products | 60% |
Studio Entertainment | 80% |
Direct-to-Consumer & International | 70% |
Question Content Area
a. Prepare a variable costing income statement for The Walt Disney Company by segment. Round all amounts to the nearest million.
Line Item Description | Media Networks | Parks, Experiences, and Products | Studio Entertainment | Direct-to-Consumer & International |
---|---|---|---|---|
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense | $- Select - | $- Select - | $- Select - | $- Select - |
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable operating expenses | - Select - | - Select - | - Select - | - Select - |
Contribution marginManufacturing marginFixed operating expensesSalesVariable commission expense | $- Select - | $- Select - | $- Select - | $- Select - |
Contribution margin Manufacturing margin SalesFixed operating expensesVariable commission expense | - Select - | - Select - | - Select - | - Select - |
Operating income/loss | $Operating income/loss | $Operating income/loss | $Operating income/loss | $Operating income/loss |
Question Content Area
b. Compute the contribution margin ratio for each segment. Round ratios to the nearest tenth of a percent.
Segment | Contribution Margin Ratio |
---|---|
Media Networks | fill in the blank 1 of 4% |
Parks, Experiences, and Products | fill in the blank 2 of 4% |
Studio Entertainment | fill in the blank 3 of 4% |
Direct-to-Consumer & International | fill in the blank 4 of 4% |
c. Based on your answers to (a) and (b), interpret the segment performance.
All segments generated a fill in the blank 1 of 10
positive negative
contribution margin, even though the Parks, Experiences, and Products and Direct-to-Consumer & International segments generated operating fill in the blank 2 of 10
losses profits
. The Media Networks segment generated the fill in the blank 3 of 10
highest lowest
contribution margin and contribution margin ratio. The Parks, Experiences, and Products and Studio Entertainment segments generated approximately the fill in the blank 4 of 10
same different
contribution margin ratios. However, because of its size, the Parks, Experiences, and Products segment generated fill in the blank 5 of 10
more less
contribution margin than the Studio Entertainment segment. The Direct-to-Consumer & International segment generated the fill in the blank 6 of 10
lowest highest
contribution margin ratio and fill in the blank 7 of 10
lowest highest
contribution margin. The recent COVID-19 pandemic fill in the blank 8 of 10
adversely not adversely
affected the preceding results. The Parks, Experiences, and Products and Studio Entertainment segments were fill in the blank 9 of 10
particularly not particularly
affected. Thus, the preceding results are fill in the blank 10 of 10
not indicative
of Disney’s normal operations for these segments.
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer