The operating revenues of the three largest business segments for Time Warner, Inc. (TWX), for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses.

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?

Transcribed Image Text:

Time Warner, Inc. Segment Revenues (in millions) Turner (cable networks and digital media) $11,364 5,890 13,037 Home Box Office (pay television) Warner Bros. (films, television, and videos)