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Wildhorse 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.
Wildhorse 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 $10,000,000 $3,950,000 $3,160,000 Variable expenses 3,950,000 1,500,000 1,800,000 Direct fixed expenses 4.450.000 1,000,000 1,200,000 Average assets 7,950,000 3,950,000 1,730,000 Required rate of return 12% 12% 12% (a) 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 $ e Textbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (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 $800,000 and is expected to generate $155,000 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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