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: Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return Retail Stores Internet $9,990,000 3,940,000 4,440,000 7,940,000 10% $3,940,000 1,490,000 990,000 3,940,000 10% Catalog Sales $3,140,000 1,790,000 1,190,000 1,750,000 10%
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: Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return Retail Stores Internet $9,990,000 3,940,000 4,440,000 7,940,000 10% $3,940,000 1,490,000 990,000 3,940,000 10% Catalog Sales $3,140,000 1,790,000 1,190,000 1,750,000 10%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
$790,000 and is expected to generate $154,000 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
$
$
S
X
Transcribed Image Text: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:
Sales revenue
Variable expenses
Direct fixed expenses
Average assets
Required rate of return
Retail Stores Internet
$9,990,000
3,940,000
4,440,000
7,940,000
10%
$3,940,000
1,490,000
990,000
3,940,000
10%
Catalog Sales
$3,140,000
1,790,000
1,190,000
1,750,000
10%
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