Question

Crane 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 $9,910,000 $3,860,000 $3,010,000 Variable expenses 3,860,000 1,410,000 1,710,000 Direct fixed expenses 4,360,000 910,000 1,110,000 Average assets 7,860,000 3,860,000 1,960,000 Required rate of return 11% 11% 11% (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 

          Crane 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
$9,910,000
$3,860,000
$3,010,000
Variable expenses
3,860,000
1,410,000
1,710,000
Direct fixed expenses
4,360,000
910,000
1,110,000
Average assets
7,860,000
3,860,000
1,960,000
Required rate of return
11%
11%
11%
(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
Show more…
Crane 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 9,910,0003,860,000 3,010,000 Variable expenses 3,860,000 1,410,000 1,710,000 Direct fixed expenses 4,360,000 910,000 1,110,000 Average assets 7,860,000 3,860,000 1,960,000 Required rate of return 11% 11% 11% (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

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Horngren’s Cost Accounting
Horngren’s Cost Accounting
Srikant M. Datar, Madhav V. Rajan 16th Edition
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Residual Income Retail: $1,100,000 Online: $209,000 Catalog: $-33,000
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Transcript

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00:01 So, here first we need to calculate the net assets of noac inc which is a difference between we can say that net assets equals to total assets minus total liabilities.
00:34 So, it is equals to $15017000 minus $822000 that is equals to $619500.
00:59 Now, here average pre -tax income is equals to $1200800 plus $1501600 plus $9540000 here we can say it is divided by 3.
01:42 So, it is equals to after solving this we get here $1218800.
01:55 Now come to the a part if crane homes wants to earn a 25 % return on its investment the excess earnings are equals to average pre -tax income minus net assets multiply by 25 % that is equals to $1218800 minus $619500 multiply by 25 % that is equals to $428450...
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