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Problem - Segment Contribution Margin Analysis

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Problem - Segment Contribution Margin Analysis

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.) $11,066

Networks (CNN, HBO, WB) 11,703

Publishing (Time, People, Sports Illustrated) 3,736

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

Filmed Entertainment 32%

Networks 30%

Publishing 72%

Required -

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?

Reference no: EM132685881

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