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) $10,596 Home Box Office (pay television) 5,615 Warner Bro. (films, television, and videos) 12,993 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 40% Home Box Office 35% Warner Bros. 25% A. Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percents) for each segment from the information given. B. Does the segment with the highest contribution margin in (A) mean that it is the most profitable segment with the highest operating income?

BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
BuyFind

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

Solutions

Chapter
Section
Chapter 20, Problem 20.16EX
Textbook Problem

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) $10,596
Home Box Office (pay television) 5,615
Warner Bro. (films, television, and videos) 12,993

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

Turner 40%
Home Box Office 35%
Warner Bros. 25%
  1. A. Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percents) for each segment from the information given.
  2. B. Does the segment with the highest contribution margin in (A) mean that it is the most profitable segment with the highest operating income?

Expert Solution

Want to see the full answer?

Check out a sample textbook solution.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Chapter 20 Solutions

Financial & Managerial Accounting
Ch. 20 - Explain why service companies use different...Ch. 20 - Variable costing Marley Company has the following...Ch. 20 - Variable costingproduction exceeds sales Fixed...Ch. 20 - Variable costing sales exceed production The...Ch. 20 - Analyzing income under absorption and variable...Ch. 20 - Contribution margin by segment The following...Ch. 20 - Contribution margin analysis The actual variable...Ch. 20 - Inventory valuation under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Cost of goods manufactured, using variable costing...Ch. 20 - Variable costing income statement On November 30,...Ch. 20 - Absorption costing income statement On March 31....Ch. 20 - Variable costing income statement The following...Ch. 20 - Estimated income statements, using absorption and...Ch. 20 - Variable and absorption costing Ansara Company had...Ch. 20 - How is the quantity factor for an incrca.sc or a...Ch. 20 - Explain why service companies use different...Ch. 20 - Product profitability analysis Power Train Sports...Ch. 20 - Territory and product profitability analysis Coast...Ch. 20 - Sales territory and salesperson profitability...Ch. 20 - Segment profitability analysis The marketing...Ch. 20 - Segment contribution margin analysis The operating...Ch. 20 - Contribution margin analysis sales Select Audio...Ch. 20 - Contribution margin analysis sales The following...Ch. 20 - Contribution margin analysis variable costs Based...Ch. 20 - Variable costing income statement for a service...Ch. 20 - Contribution margin reporting and analysis for a...Ch. 20 - Variable costing income statement and contribution...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Walthman...Ch. 20 - Segment variable costing income statement and...Ch. 20 - Contribution margin analysis Farr Industries Inc....Ch. 20 - B Absorption and variable costing income...Ch. 20 - Income statements under absorption costing and...Ch. 20 - Absorption and variable costing income statements...Ch. 20 - Salespersons' report and analysis Pachec Inc....Ch. 20 - Variable costing income statement and effect on...Ch. 20 - Contribution margin analysis Mathews Company...Ch. 20 - Yum! Brands: Segment sales and EBITDA analysis...Ch. 20 - Walt Disney: Segment revenue analysis The Walt...Ch. 20 - Apple Inc.: Segment revenue analysis Segment...Ch. 20 - LVMH: Group segment sales and EBITDA analysis LVMH...Ch. 20 - Ethics in Action The Southern Division manager of...Ch. 20 - Communication Bon Jager Inc. manufactures and...

Additional Business Textbook Solutions

Find more solutions based on key concepts
What are the underlying assumptions of Theory X and Theory Y?

Foundations of Business (MindTap Course List)

Why is productivity important?

Principles of Microeconomics (MindTap Course List)

What is the purpose of a digital audit trail?

Accounting Information Systems

REAL RISK-FREE RATE You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your b...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)