**Educational Website Content**---### Financial Analysis of Business Segments#### Segment Revenues- **Turner (cable networks and digital media):** $90,000- **Home Box Office (pay television):** $93,000- **Warner Bros. (films, television, and videos):** $27,000#### Variable Cost Percentage of Sales- **Turner:** 28%- **Home Box Office:** 38%- **Warner Bros.:** 30%---#### Task**a. Contribution Margin and Ratio Calculation**Determine the contribution margin and contribution margin ratio for each segment using the information provided. Round to the nearest whole millionth (e.g., 5,688.7 to 5,689) and round contribution margin ratios to whole percentages.| | Turner | Home Box Office | Warner Bros. ||------------|--------------|-----------------|---------------|| Revenues | $ | $ | $ || Variable Costs | $ | $ | $ || Contribution Margin | $ | $ | $ || Contribution Margin Ratio (as a percent) | % | % | % |**b. Profitability Analysis**- Does your answer to (a) imply that the other segments are more profitable businesses? The higher contribution margin ratio of a segment should not be interpreted as being the only profitable segment. If the business volume is insufficient to surpass the break-even point, then all segments must be evaluated for profitability. In the final analysis, fixed costs must also be considered to assess overall profitability. The provided analysis showcases the sensitivity of profit relative to volume changes.### SummaryThis exercise highlights the importance of understanding both contribution margins and fixed costs when evaluating the profitability of different business segments. **Segment Contribution Margin Analysis**The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year are provided below. Each segment includes various businesses, examples of which are indicated in parentheses.**Time Warner, Inc. Segment Revenues (in millions):**- Turner (cable networks and digital media): $90,000- Home Box Office (pay television): $93,000- Warner Bros. (films, television, and videos): $27,000Assume that the variable costs as a percent of sales for each segment are as follows:- Turner: 28%- Home Box Office: 38%- Warner Bros.: 30%**Instructions:**a. Determine the contribution margin and contribution margin ratio for each segment from the data provided. When necessary, round to the nearest whole millionth (e.g., round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given.**Template for Calculating Contribution Margin:**| | Turner | Home Box Office | Warner Bros. ||------------------------|------------------|-----------------|---------------|| Revenues | $ | $ | $ || Variable costs | $ | $ | $ || Contribution margin | $ | $ | $ |This analysis is crucial for understanding the financial health and performance of each business segment within a corporation by evaluating how much profit a company makes after covering variable costs.

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 Home Box Office Warner Bros. Turner (cable networks and digital media) Home Box Office (pay television) Warner Bros. (films, television, and videos) Assume that the variable costs as a percent of sales for each segment are as follows: 28% 38% 30% $90,000 93,000 27,000 a. Determine the contribution margin and contribution margin ratio for each segment from the information given. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given.

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 Home Box Office Warner Bros. Turner (cable networks and digital media) Home Box Office (pay television) Warner Bros. (films, television, and videos) Assume that the variable costs as a percent of sales for each segment are as follows: 28% 38% 30% $90,000 93,000 27,000 a. Determine the contribution margin and contribution margin ratio for each segment from the information given. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Time Warner, Inc. Segment Revenues (in millions) Turner (cable networks and digital media) Home Box Office (pay television) Warner Bros. (films, television, and videos) Assume that the variable costs as a percent of sales for each segment are as follows: Turner 34% Home Box Office 22% Warner Bros. 47% a. Determine the contribution margin and contribution margin ratio for each segment from the information given. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given. Home Box Office Warner Bros. Revenues Variable costs $69,900 26,900 88,300 Contribution margin Contribution margin ratio (as a percent) Turner % b. Does your answer to (a) mean that the other segments are more profitable businesses? The higher contribution margin ratio of a segment should not be interpreted as being the sufficient to exceed the break-even point, then the segments would be…
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