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Part B please Ivanhoe Decor sells home decor items through three distribution channels-retail stores, the Internet, and catalog sales. Each distribution channel is evaluated as
Part B please
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 Internet Catalog Sales Sales revenue $10,040,000 $3,990,000 $3,240,000 Variable expenses 3,990,000 1,540,000 1,840,000 Direct fixed expenses 4,490,000 1,040,000 1,240,000 Average assets 7,990,000 3.990.000 1,690,000 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 a preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).) Residual Income $ 681100 Retail $ 971100 Online $ -25900 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 $840,000 and is expected to generate $159,000 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 $ CatalogStep by Step Solution
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