Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 16E
(a)
To determine
Determine the contribution margin and contribution margin ratio for each segment of Incorporation TW.
(b)
To determine
Does the segment with the highest contribution margin identified in part a, is the most profitable segment with the highest operating income.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Some financial information for each of three companies is reflected below in columns A, B, and C.
Use your knowledge of CVP relationships to fill in the missing pieces numbered (1) through (9). Consider each company (i.e., column)
separately. (Round variable cost per unit and contribution margin ratio to 2 decimal places, e.g. 0.24.)
Selling price
Total fixed costs
Sales volume (units)
Variable cost/unit
Operating income
Tax rate
After-tax profit
Contribution margin ratio
A
$4
$12,900
31,000
3720 (1)
$21,820
30 % (2)
$15,274
34,720
(3)
B
$750
2,700
$360
25%
$692,250
(4)
(5)
(6)
$450,000
$43.20
$262,800
40%
0.55
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.
Turner (cable networks and digital media)
Home Box Office (pay television)
Warner Bros. (films, television, and videos)
Turner
Home Box Office
Warner Bros.
Time Warner, Inc.
Segment Revenues
(in millions)
Assume that the variable costs as a percent of sales for each
segment are as follows:
Revenues
Variable costs
$77,000
55,500
78,500
Contribution margin
Contribution margin ratio (as a percent)
43%
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.
43%
48%
Turner
Home Box Office
Warner Bros.
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.
Turner (cable networks and digital media)
Home Box Office (pay television)
Warner Bros. (films, television, and videos)
Turner
Home Box Office
Warner Bros.
Time Warner, Inc.
Segment Revenues
(in millions)
Assume that the variable costs as a percent of sales for
each segment are as follows:
Revenues
Variable costs
$94,300
79,200
29,300
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.
Contribution margin
Contribution margin ratio (as a percent)
40%
51%
37%
Turner
%
Home Box Offic
b. Does your answer to (a)…
Chapter 7 Solutions
Managerial Accounting
Ch. 7 - What types of costs are customarily included in...Ch. 7 - Which type of manufacturing cost (direct...Ch. 7 - Which of the following costs would be included in...Ch. 7 - In the variable costing income statement, how are...Ch. 7 - Prob. 5DQCh. 7 - Prob. 6DQCh. 7 - Discuss how financial data prepared on the basis...Ch. 7 - Prob. 8DQCh. 7 - Explain why rewarding sales personnel on the basis...Ch. 7 - Explain why service companies use different...
Ch. 7 - Variable costing Marley Company has the following...Ch. 7 - Prob. 2BECh. 7 - Variable costingsales exceed production The...Ch. 7 - Prob. 4BECh. 7 - Contribution margin by segment The following...Ch. 7 - At the end of the first year of operations, 21,500...Ch. 7 - Gallatin County Motors Inc. assembles and sells...Ch. 7 - Fresno Industries Inc. manufactures and sells...Ch. 7 - On March 31, the end of the first month of...Ch. 7 - On April 30, the end of the first month of...Ch. 7 - On October 31, the end of the first month of...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Estimated income statements, using absorption and...Ch. 7 - The following data were adapted from a recent...Ch. 7 - Prob. 10ECh. 7 - Explain why service companies use different...Ch. 7 - Galaxy Sports Inc. manufactures and sells two...Ch. 7 - Prob. 13ECh. 7 - Sales territory and salesperson profitability...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Variable costing income statement for a service...Ch. 7 - Variable costing income statement for a service...Ch. 7 - Prob. 1PACh. 7 - The demand for solvent, one of numerous products...Ch. 7 - During the first month of operations ended May 31,...Ch. 7 - Salespersons report and analysis Walthman...Ch. 7 - Segment variable costing income statement and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Income statements under absorption costing and...Ch. 7 - Absorption and variable costing income statements...Ch. 7 - Prob. 4PBCh. 7 - Variable costing income statement and effect on...Ch. 7 - Prob. 1MADCh. 7 - Prob. 2MADCh. 7 - Prob. 3MADCh. 7 - Segment disclosure by Apple Inc. (AAPL) provides...Ch. 7 - Prob. 1TIFCh. 7 - Inventory effects under absorption costing BendOR,...Ch. 7 - Communication Bon Jager Inc. manufactures and...Ch. 7 - Prob. 1CMACh. 7 - Chassen Company, a cracker and cookie...Ch. 7 - Prob. 3CMACh. 7 - Bethany Company has just completed the first month...
Knowledge Booster
Similar questions
- 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) $90,600 Home Box Office (pay television) 74,100 Warner Bros. (films, television, and videos) 13,300 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 27% Home Box Office 42% Warner Bros. 38% 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 $ $ $ Variable costs Contribution margin $ $ $…arrow_forwardRefer to the information for Jasper Company on the previous page.Required:1. Prepare an income statement for Jasper for last year. Calculate the percentage of sales for eachline item on the income statement. (Note: Round percentages to the nearest tenth of a percent.)2. CONCEPTUAL CONNECTION Briefly explain how a manager could use the incomestatement created for Requirement 1 to better control costs.arrow_forwardThe following selected data pertain to the Argent Division for last year: Required: 1. How much is the residual income? 2. How much is the return on investment? (Rounded to four significant digits.)arrow_forward
- 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.arrow_forwardBreak-Even Sales and Cost-Volume-Profit Chart Last year Hever Inc. had sales of $1,000,000, based on a unit selling price of $400. The variable cost per unit was $320, and fixed costs were $88,000. The maximum sales within Hever Inc.'s relevant range are 3,200 units. Hever Inc. is considering a proposal to spend an additional $36,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity. Required: 1. Construct a cost-volume-profit chart on your own paper, indicating the break-even sales for last year. In your computations, do not round the contribution margin percentage. Break-even sales (dollars) Break-even sales (units) 2. Using the cost-volume-profit chart prepared in part (1), determine (a) the income from operations for last year and (b) the maximum income from operations that could have been realized during the year. In your computations, do not round the contribution margin percentage. Income from operations Maximum income…arrow_forwardThe 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) $95,600 Home Box Office (pay television) 33,700 Warner Bros. (films, television, and videos) 80,500 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 38% Home Box Office 35% Warner Bros. 50% 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. Turner Home Box Office Warner Bros. Revenues $ $ $ Variable costs Contribution margin $ $ $ Contribution margin ratio (as a percent) % % % b.…arrow_forward
- The following information is extracted from the income statement of Al Shams Private Ltd. The Price (P) per unit of product is OMR 12 and Variable cost (VC) per unit is OMR 7 and fixed operating cost is OMR 8,000.Answer the following question after analyzing the given table. YEAR 1 YEAR 2 Sales (in units) 5,000 9,500 Sales Revenue (in OMR) ? ? Less: Variable operating costs ? ? Less: Fixed operating costs 8,000 ? Earnings before interest and taxes (EBIT) ? ? Complete the table Calculate the Degree of Operating Leverage (DOL). Interpret your answer (DOL).arrow_forwardThe following income statement applies to Finch Company for the current year: Income Statement Sales revenue (480 units × $30) $ 14,400 Variable cost (480 units × $15) (7,200 ) Contribution margin 7,200 Fixed cost (4,000 ) Net income $ 3,200 Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Fincharrow_forwardThe following CVP income statements are available for Wildhorse Corp. and Blossom, Inc. Wildhorse Corp. Blossom, Inc. Sales revenue $854,000 $854,000 * Variable costs 396,500 228,750 Contribution margin 457,500 625,250 Fixed costs 305,000 472,750 Net income $152,500 $152,500 (a) Compute the degree of operating leverage for each company. (Round answers to 1 decimal place, e.g. 15.5.) Degree of Operating Leverage Wildhorse Blossomarrow_forward
- An analysis of the income statement of MERDEKA Corporation showed the following data on December 31, 2019 (all amounts in pesos): Sales Selling price per piece Variable costs and expenses Fixed costs and expenses 4,850,000 -25 -2,667,500 - 1,212,500 Using the above accounting information, solve for the answers to the following questions: How much is the contribution margin? How much is the net profit? How much is the breakeven sales? How much is number of units sold at break-even? How much is sales at target profit of 150% of current profit?|arrow_forwardThe following income statement applies to Franklin Company for the current year: Income Statement Sales revenue (410 units × $31) Variable cost (410 units × $16) Contribution margin Fixed cost Net income Required a. Use the contribution margin approach to calculate the magnitude of operating leverage. b. Use the operating leverage measure computed in Requirement a to determine the amount of net income that Franklin Company will earn If It experiences a 10 percent increase in revenue. The sales price per unit is not affected. c-1. Verify your answer to Requirement b by constructing an income statement based on a 10 percent increase in sales revenue. The sales price is not affected. c-2. Calculate the percentage change in net income for the two income statements. Req A and B Complete this question by entering your answers in the tabs below. Req C1 a. Operating leverage b. Net income $ $12,710 (6,560) 6,150 (4,100) $2,050 > Answer is complete but not entirely correct. Req C2 a. Use the…arrow_forwardSegment 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) $62,900 Home Box Office (pay television) 65,900 Warner Bros. (films, television, and videos) 72,100 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 18% Home Box Office 32% Warner Bros. 52% 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. 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…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning