gment Contribution Margin Analysis e 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) mer (cable networks and digital media) me Box Office (pay television) $91,600 55,800 arner Bros. (films, television, and videos) 92,100 sume that the variable costs as a percent of sales for each segment are as follows: mner me Box Office arner Bros. 32% 47% 49% Determine the contribution margin and contribution margin ratio for each segment from the information given. Round contribution margin ratio to whole percents for each segment from the information given. Enter all amounts as positive numbers. Turner Home Box Office Warner Bros. evenues riable costs ntribution margin ntribution margin ratio (as a percent) % % Does your answer to (b) mean that the other segments are more profitable businesses? e higher contribution margin ratio of a segment should not be interpreted as being the profitable segment. If the volume of business is not sufficient to exceed the break-even point, then the segments would be shows how sensitive the profit will be to changes in volume. the final analysis, the fixed costs also should be considered in determining the overall profitability of the segments. The
gment Contribution Margin Analysis e 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) mer (cable networks and digital media) me Box Office (pay television) $91,600 55,800 arner Bros. (films, television, and videos) 92,100 sume that the variable costs as a percent of sales for each segment are as follows: mner me Box Office arner Bros. 32% 47% 49% Determine the contribution margin and contribution margin ratio for each segment from the information given. Round contribution margin ratio to whole percents for each segment from the information given. Enter all amounts as positive numbers. Turner Home Box Office Warner Bros. evenues riable costs ntribution margin ntribution margin ratio (as a percent) % % Does your answer to (b) mean that the other segments are more profitable businesses? e higher contribution margin ratio of a segment should not be interpreted as being the profitable segment. If the volume of business is not sufficient to exceed the break-even point, then the segments would be shows how sensitive the profit will be to changes in volume. the final analysis, the fixed costs also should be considered in determining the overall profitability of the segments. The
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Segment Contribution Margin Analysis
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)
Home Box Office (pay television)
Warner Bros. (films, television, and videos)
$91,600
55,800
92,100
Assume that the variable costs as a percent of sales for each segment are as follows:
Turner
Home Box Office
Warner Bros.
32%
47%
49%
a. Determine the contribution margin and contribution margin ratio for each segment from the information given. Round contribution margin ratio to whole percents for each segment from the information given. Enter all amounts as positive numbers.
Home Box Office
Turner
Warner Bros.
Revenues
Variable costs
Contribution margin
Contribution margin ratio (as a percent)
%
%
%
b. Does your answer to (b) mean that the other segments are more profitable businesses?
profitable segment. If the volume of business is not sufficient to exceed the break-even point, then the segments would be
shows how sensitive the profit will be to changes in volume.
The higher contribution margin ratio of a segment should not be interpreted as being the
In the final analysis, the fixed costs also should be considered in determining the overall profitability of the segments. The
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