Question 7 (just here for knowledge of which question is which)

Blossom 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 $9,900,000 $3,850,000 $3,000,000 Variable expenses 3,850,000 1,400,000 1,700,000 Direct fixed expenses 4,350,000 900,000 1,100,000 Average assets 7,850,000 3,850,000 1,950,000 Required rate of return 12% 12% 12% (a) 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 $700,000 and is expected to generate $145,000 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 e Textbook and Media Sun forator