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calculate the residual income Wildhorse Decor sells home decor items through three distribution channels-retail stores, the Internet, and catalog sales. Each distribution channel is evaluated
calculate the residual income
Wildhorse Decor sells home decor items through three distribution channels-retail 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 Stores Internet Catalog Sales Sales revenue $10,110,000 $3,380,000 Variable expenses 4,060,000 1,910,000 Direct fixed expenses 4,560,000 1,310,000 Average assets 8,060,000 1,620,000 Required rate of return 11% 11% $4,060,000 1,610,000 1,110,000 4,060,000 11% 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 Online Catalog SA $ LA 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 $910,000 and is expected to generate $166,000 in 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 Online Catalog $ LA $
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