BlossomDecor sells home decor items through three distribution channelsretail stores, the Internet, and catalog sales. Each distribution channel is evaluated as an investment center. Selected results from the latest year are as follows:

Retail StoresInternetCatalog SalesSales revenue$10,120,000$4,070,000$3,400,000Variable expenses4,070,0001,620,0001,920,000Direct fixed expenses4,570,0001,120,0001,320,000Average assets8,070,0004,070,0001,610,000Required rate of return12%12%12%

(a)

Calculate the current residual income for each distribution channel.(If the residual income is a loss then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

Residual Income

Retail$

enter a dollar amount

Online$

enter a dollar amount

Catalog$

enter a dollar amount

(b)

The corporate office is giving the managers of each channel the option of a customer relationship management system that will allow the managers to gather data about their customers and be more effective in their marketing efforts. The system will cost $920,000and is expected to generate $167,000in additional annual segment margin.

Calculate the residual income of each distribution channel assuming it purchases the new customer relationship management system.(If the residual income is a loss then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

Residual Income

Retail$

enter a dollar amount

Online$

enter a dollar amount

Catalog$

enter a dollar amount