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) Home Box Office (pay television) Warner Bros. (films, television, and videos) $39,700 39,600 72,800 Assume that the variable costs as a percent of sales for each segment are as follows: Turner Home Box Office Warner Bros. 52% 29% 52% 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. Revenues Variable costs Contribution margin Contribution margin ratio (as a percent) Turner % Home Box Office Warner Bros. % % b. Does your answer to (a) mean that the other segments are more profitable businesses? The higher contribution margin ratio of a segment should not be interpreted as being the would be In the final analysis, the fixed costs also should be considered in determining the overall profitability of the segments. The profitable segment. If the volume of business is not sufficient to exceed the break-even point, then the segments shows how sensitive the profit will be to changes in volume.