Question
Segment Contribution Margin Analysis The Walt Disney Company (DIS) is a global entertainment company that is organized into four business segments as follows: Media Networks:
Segment Contribution Margin Analysis
The Walt Disney Company (DIS) is a global entertainment company that is organized into four business segments as follows:
Media Networks: Television production and distribution, including ABC television network, ESPN, National Geographic.
Parks, Experiences, and Products: Theme parks and resorts, including Walt Disney World and Disneyland; Experiences, including Disney Cruise Line and Disney Vacation Club; Products, including Disney and Pixar characters, comic books, and magazines.
Studio Entertainment: Music and motion picture production and distribution, including Twentieth Century Studios, Marvel, and Lucasfilm.
Direct-to-Consumer & International: Streaming services, including Disney+, ESPN+, and Hulu.
For a recent year, Disney reported the following segment results (in millions):
Line Item Description | Segment Media Networks | Segment Parks, Experiences, and Products | Segment Entertainment | Direct-to-Consumer & International |
---|---|---|---|---|
Revenues | $28,393 | $16,502 | $9,636 | $16,967 |
Operating expenses | (19,200) | (16,600) | (7,100) | (19,700) |
Operating income | $9,193 | $(98) | $2,536 | $(2,733) |
Assume the following percentages of total operating expenses for each segment are variable:
Segment | Percentage of Variable Operating Expenses |
---|---|
Media Networks | 75% |
Parks, Experiences, and Products | 60% |
Studio Entertainment | 80% |
Direct-to-Consumer & International | 70% |
a. Prepare a variable costing income statement for The Walt Disney Company by segment. If required, use a minus sign to indicate an operating loss. Round all amounts to the nearest million.
Line Item Description | Media Networks | Parks, Experiences, and Products | Studio Entertainment | Direct-to-Consumer & International |
---|---|---|---|---|
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense | $- Select - | $- Select - | $- Select - | $- Select - |
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable operating expenses | - Select - | - Select - | - Select - | - Select - |
Contribution marginManufacturing marginFixed operating expensesSalesVariable commission expense | $- Select - | $- Select - | $- Select - | $- Select - |
Contribution marginManufacturing marginSalesFixed operating expensesVariable commission expense | - Select - | - Select - | - Select - | - Select - |
Operating income/loss | $Operating income/loss | $Operating income/loss | $Operating income/loss | $Operating income/loss |
b. Compute the contribution margin ratio for each segment. Round ratios to the nearest tenth of a percent.
Segment | Contribution Margin Ratio |
---|---|
Media Networks | % |
Parks, Experiences, and Products | % |
Studio Entertainment | % |
Direct-to-Consumer & International | % |
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