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Cullumber 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.
Cullumber 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 $9,920,000 $3,870,000 $3,020,000 Variable expenses 3,870,000 1,420,000 1,720,000 Direct fixed expenses 4,370,000 920,000 1,120,000 Average assets 7,870,000 3,870,000 1,970,000 Required rate of return 10% 10% 10% 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 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 $720,000 and is expected to generate $147,000 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
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