The operating revenues of the three largest business segments for Time Warner, Inc.,for a recent year are

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The operating revenues of the three largest business segments for Time Warner, Inc.,for a recent year are shown below. 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.) Networks (CNN, HBO, WB) $11,066 11,

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

Filmed Entertainment........................32%
Networks.............................................30%
Publishing...........................................72%

a. Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percents) for each segment from the above information.

b. Why is the contribution margin ratio for the Publishing segment smaller than for the other segments?
c. Does your answer to (b) mean that the other segments are more profitable businesses than the Publishing segment?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Financial and Managerial Accounting Using Excel for Success

ISBN: 978-1111993979

1st edition

Authors: James Reeve, Carl S. Warren, Jonathan Duchac

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