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) $51,200 Home Box Office (pay television) 19,000 Warner Bros. (films, television, and videos) 41,900 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 48% Home Box Office 20% Warner Bros. 19% 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. Turner Home Box Office Warner Bros. Revenues $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Variable costs fill in the blank 4 fill in the blank 5 fill in the blank 6 Contribution margin $fill in the blank 7 $fill in the blank 8 $fill in the blank 9 Contribution margin ratio (as a percent) fill in the blank 10 % fill in the blank 11 % fill in the blank 12

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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)	$51,200
Home Box Office (pay television)	19,000
Warner Bros. (films, television, and videos)	41,900

Assume that the variable costs as a percent of sales for each segment are as follows:

Turner	48%
Home Box Office	20%
Warner Bros.	19%

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.

	Turner	Home Box Office	Warner Bros.
Revenues	$fill in the blank 1		$fill in the blank 2		$fill in the blank 3
Variable costs	fill in the blank 4		fill in the blank 5		fill in the blank 6
Contribution margin	$fill in the blank 7		$fill in the blank 8		$fill in the blank 9
Contribution margin ratio (as a percent)	fill in the blank 10	%	fill in the blank 11	%	fill in the blank 12	%

Expert Solution

Step 1

Variable Cost :— It is the cost that changes with change in units.

If % of variable cost is given then it is calculated by multiplying % of variable cost with sales value.

Contribution Margin :— It is the difference of sales value and variable cost.

Contribution Margin Ratio :— It is the ratio of contribution Margin and sales value.

CM Ratio = Contribution Margin/Sales

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