Thursday Afternoon sells housewares through three distribution channels-retail stores, Internet, and catalog sales. Each distribution channel is evaluated as an investment center. Selected results from the latest year are as follows:

Required

a. Calculate the margin, asset turnover, and ROI for each of the three distribution channels.

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 $500,000 and is expected to generate $65,000 in additional annual segment margin. If distribution channel managers are evaluated based on the trend of their ROIs, which managers will invest in the system? Explain your reasoning.

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Retail Stores Internet Catalog Sales $3,600,000 2,160,000 Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return $12,000,000 4,800,000 6,720,000 6,000,000 12% $2,750,000 1,375,000 1,155,000 2,000,000 990,000 3,000,000 12% 12%