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) $10,596 Home Box Office (pay television) 5,615 Warner Bros. (films, television, and videos) 12,993 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 40% Home Box Office 35% Warner Bros. 25% a. Determine the contribution margin and contribution margin ratio. Enter amounts in millions. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to the nearest whole percent for each segment from the information given. Enter all amounts as positive numbers.

Answer 1

Answer:

Turner (cable networks and digital media) $6,358 (million)

Home Box Office (pay television) $3,650 (million)

Warner Bros. (films, television, and videos) $9,745 (million)

Explanation:

Turner (cable networks and digital media) Sales revenue = $10,596

Variable cost = 40% (given)

Contribution margin = 60%

Contribution = 60% of 10,596 = 6,357.6

Contribution is $6,358 (million).

Home Box Office (pay television)

Sales revenue = $5,615

Variable cost = 35% (given)

Contribution margin = 65%

Contribution = 65% of 5615 = 3,649.8

Contribution is $3,650 (million).

Warner Bros. (films, television, and videos) Sales revenue = $12,993

Variable cost = 25% (given)

Contribution margin = 75%

Contribution = 75% of 12,993 = 9,744.75

Contribution is $9,745 (million).