Crane 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

$$9,910,000$ $$3,860,000$ $$3,010,000$

Variable expenses

$3,860,0001,410,0001,710,000$

Direct fixed expenses

$4,360,000910,0001,110,000$

Average assets

$7,860,0003,860,0001,960,000$

Required rate of return

$11\%11\%11\%$

$($a$)$

Your answer is correct.

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

$825400$

Correct answer

Online

$enter a dollar amount

$1115400$

Correct answer

Catalog

$enter a dollar amount

$(25600)$

Correct answer

eTextbook and Media

Attempts: $1$ of $3$ used

$($b$)$

Your answer is incorrect.

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 $$710,000$ and is expected to generate $$146,000$ 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

$enter a dollar amount

$9,191,400$

Incorrect answer

Online

$enter a dollar amount

$3,581,400$

Incorrect answer

Catalog

$enter a dollar amount

$2,940,400$

Incorrect answer