Question

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)	$14,218
Home Box Office (pay television)	12,014
You are in Column Time Warner, Inc. Segment Revenues (in millions)Warner Bros. (films, television, and videos)	You are in Column Time Warner, Inc. Segment Revenues (in millions)3,478

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

Turner	36%
Home Box Office	33%
Warner Bros.	74%

Required:

a.

Determine the contribution margin Sales less variable costs and variable selling and administrative expenses. and contribution margin ratio for each segment from the information given. Enter amounts in millions rounded to whole amount. Round contribution margin ratios to whole percents for each segment from the above information. Enter all amounts as positive numbers. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

b.

Does the segment with the highest contribution margin in (a) mean that it is the most profitable segment with the highest operating income?

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Amount Descriptions

Amount Descriptions In CengageNOW, an Amount Description is a text entry other than an Account that has an amount associated with it.
Contribution margin
Contribution margin ratio
Fixed costs
Income from operations
Revenues
Variable costs

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Contribution Margin Analysis

Shaded cells have feedback.

a. Determine the contribution margin

Sales less variable costs and variable selling and administrative expenses.

and contribution margin ratio for each segment from the information given. Enter amounts in millions rounded to whole amount. Round contribution margin ratios to whole percents for each segment from the above information. Enter all amounts as positive numbers. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Question not attempted.

Score: 0/63

1		Turner	Home Box Office	Warner Bros.
2
3
4
5

Solution

1		Turner	Home Box Office	Warner Bros.
2
3
4
5

Points:

0 / 16

Feedback

Check My Work

Revenues - Variable Costs = Contribution Margin

To calculate the contribution margin ratio, divide the contribution margin by revenues.

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Final Ques

Answer 1

Particular	Turner	Home Boxes	Segment Revenue
Segment Revenue	14218	12014	3478
Variable cost Percentage	36%	33%	74%
Variable cost	5118	3965	2574
Contribution Margin	9100	8049	904
Margin Ratio Percentage	64%	67%	26%
In the given question highest contribution margin is of "Home Boxes" with 67%. But most profitable segment with highest operating income is "Turner" with $ 9100.