Sandhill Decor sells home decor items through three distribution channelsretail 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 $10,100,000 $4,050,000 $3,360,000 Variable expenses 4,050,000 1,600,000 1,900,000 Direct fixed expenses 4,550,000 1,100,000 1,300,000 Average assets 8,050,000 4,050,000 1,630,000 Required rate of return 11% 11% 11%

1. 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).)

2. 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 $900,000 and is expected to generate $165,000 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).)

		enter a dollar amount

Sandhill 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 $10,100,000 $4,050,000 $3,360,000 4,050,000 1,600,000 1,900,000 Variable expenses Direct fixed expenses 4,550,000 1,100,000 1,300,000 Average assets 8,050,000 4,050,000 1,630,000 Required rate of return 11% 11% 11% 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, eg. (5,125).) Residual Income $ -720500 Retail $ -297000 Online $ - 161700 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 $900,000 and is expected to generate $ 165,000 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, eg. (5,125).) Residual Income TA Retail $ Online $ $ Catalog