Sheridan 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 $10,070,000 $4,020,000 4,020,000 1,570,000 4,520,000 1,070,000 8,020,000 4,020,000 10% 10% Catalog Sales $3,280,000 1,870,000 1,270,000 1,660,000 10%
Sheridan 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 $10,070,000 $4,020,000 4,020,000 1,570,000 4,520,000 1,070,000 8,020,000 4,020,000 10% 10% Catalog Sales $3,280,000 1,870,000 1,270,000 1,660,000 10%
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter21: Variable Costing For Management
analysis
Section: Chapter Questions
Problem 15E
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![Sheridan 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 Catalog Sales
$10,070,000 $4,020,000
4,020,000
1,570,000
4,520,000
1,070,000
8,020,000
4,020,000
10%
10%
$3,280,000
1,870,000
1,270,000
1,660,000
10%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53f0d767-1729-4fa4-8707-675d9763ffa6%2F7848cc98-316b-4f64-ae58-589f8265fd29%2F7l15hv7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Sheridan 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 Catalog Sales
$10,070,000 $4,020,000
4,020,000
1,570,000
4,520,000
1,070,000
8,020,000
4,020,000
10%
10%
$3,280,000
1,870,000
1,270,000
1,660,000
10%
![(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
$870,000 and is expected to generate $162,000 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, eg. -5,125 or parenthesis, e.g. (5,125))
Retail
Online
Catalog
Residual Income](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53f0d767-1729-4fa4-8707-675d9763ffa6%2F7848cc98-316b-4f64-ae58-589f8265fd29%2F956p0nv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:(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
$870,000 and is expected to generate $162,000 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, eg. -5,125 or parenthesis, e.g. (5,125))
Retail
Online
Catalog
Residual Income
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