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: Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return (a) Retail Stores $10,110,000 4,060,000 4,560,000 8,060,000 11% Internet $4,060,000 1,610,000 1,110,000 4,060,000 11% Catalog Sales $3,380,000 1,910,000 1,310,000 1,620,000 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, e.g. (5,125).)
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: Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return (a) Retail Stores $10,110,000 4,060,000 4,560,000 8,060,000 11% Internet $4,060,000 1,610,000 1,110,000 4,060,000 11% Catalog Sales $3,380,000 1,910,000 1,310,000 1,620,000 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, e.g. (5,125).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject:- accounting
Transcribed Image Text: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:
Sales revenue
Variable expenses
Direct fixed expenses
Average assets
Required rate of return
(a)
Retail
Online
Catalog
(b)
Retail
$
Online
$
Catalog
$
Retail Stores
$
$10,110,000
$
4,060,000
$
4,560,000
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).)
8,060,000
11%
Residual Income
Internet
$4,060,000
1,610,000
1,110,000
Residual Income
4,060,000
11%
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
$910,000 and is expected to generate $166,000 in additional annual segment margin.
Catalog Sales
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).)
$3,380,000
1.910.000
1,310,000
1,620,000
11%
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