Question 1 Cullumber Decor sells home decor items through three distribution cha

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Question 1 Cullumber 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 Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return $12,034,000 $2,700,000 4,850,000 1,384,000 6,726,000 1,196,000 5,201,000 2,310,000 1296 Catalog Sales $3,604,000 2,196,000 1,010,000 2,510,000 12% 12% 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 $ LINK TO TEXT LINK TO VIDEO

Explanation / Answer

Solution:

Computation of Residual Income Particulars Retail Store Internet Catalogue Sales Sales Revenue $12,034,000 $2,700,000 $3,604,000 Variable Expenses $4,850,000 $1,384,000 $2,196,000 Direct Fixed Expenses $6,726,000 $1,196,000 $1,010,000 Total Income $458,000 $120,000 $398,000 Average Assets $5,201,000 $2,310,000 $2,510,000 Required rate of return 12% 12% 12% Required return on investment $624,120 $277,200 $301,200 Residual Income ($166,120) ($157,200) $96,800

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