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
Warner Bros. (films, television, and videos)	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 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?

Answer 1

Answer:-a)-

Time Warner Inc.
Contribution margin
($ in millions)
Segments	Turner Cable	Ratios	Home Box	Ratios	Warner Bros.	Ratios
	$	%	$	%	$	%
Sales Revenues	14218	100	12014	100	3478	100
Less:- Variable costs	14218*36%=5118	36	12014*33%=3965	33	3478*74%=2574	74
Contribution Margin	9100	74	8049	67	904	26

b)-No, it is does not mean that the segment having highest contribution margin will be the most profitable segment with the highest operating income.