The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year
Question:
The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses.
Time Warner, Inc.
Segment Revenues
(in millions)
Turner (cable networks and digital media)......................$10,596
Home Box Office (pay television) ..................................5,615
Warner Bros. (films, television, and videos) .....................12,993
Assume that the variable costs as a percent of sales for each segment are as follows:
Turner..................................40%
Home Box Office....................35%
Warner Bros..........................25%
A. Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percents) for each segment from the information given.
B. Does the segment with the highest contribution margin in (A) mean that it is the most profitable segment with the highest operating income?
Contribution MarginContribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Financial And Managerial Accounting
ISBN: 9781337119207
14th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac