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Ivanhoe 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.
Ivanhoe 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 $9.930,000 Internet $3.880,000 Catalog Sales $3,030.000 1.730.000 1.130,000 Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return 1.430,000 3.880,000 4.380.000 930,000 7,880,000 3.880,000 1,980,000 11% 1196 11% (a) Calculate the current residual income for each distribution channel. (1f the residual income is a loss then enter with a negative sign preceding the number, eg.-5,125 or parenthesis, eg. (5,125).) Residual Income $ Retail $ Online $ Catalog (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 $730.000 and is expected to generate $ 148,000 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, eg.-5,125 or parenthesis, eg. (5,125).) Residual Income $ Retail $ Online $ Catalog eTextbook and Media
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