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) Filmed Entertainment (Warner Bros.) $14,204 Networks (CNN, HBO, WB) 12,018 Publishing (Time, People, Sports Illustrated) 3,436 Assume that the variable costs as a percent of sales for each segment are as follows: Filmed Entertainment 35% Networks 32% Publishing 72% 1.Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percents) for each segment from the information given. 2. Why is the contribution margin ratio for the Publishing segment smaller than for the other segments? 3.Does your answer to (b) mean that the other segments are more profitable businesses than the Publishing segment?
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)
Filmed Entertainment (Warner Bros.) $14,204
Networks (CNN, HBO, WB) 12,018
Publishing (Time, People, Sports Illustrated) 3,436
Assume that the variable costs as a percent of sales for each segment are as follows:
Filmed Entertainment 35%
Networks 32%
Publishing 72%
1.Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percents) for each segment from the information given.
2. Why is the contribution margin ratio for the Publishing segment smaller than for the other segments?
3.Does your answer to (b) mean that the other segments are more profitable businesses than the Publishing segment?
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