Chrome File Edit View History Bookmarks Profiles Tab Window Help O L o Q g @ Fri Mar 31 4:19 PM D2L W11 Reporting for Contr X GNDS125 W23 Final Par X = GNDS 125 final paper - X Question 2 - A9 - Conne X Course Hero * *Homework Help - Q&A f X + - C ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253%252F%252Fnewconnect.mheducation.com... dj Update Maps D2L smith learning solus Events - Glean Organizational be... Managerial Accou A9 i Saved Help Save & Exit Submit 2 Problem 11-21 Return on Investment and Residual Income [LO3, LO4] Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that he had to see the numbers before he made a move. His division's ROI has led the company for three years, and he doesn't want any letdown. Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year- 10 end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last year points are given below: eBook Sales $30, 100, 000 Variable expenses 14 , 570 , 000 References Contribution margin 15, 530, 000 Fixed expenses 13, 122, 000 Operating income $ 2, 408, 000 Divisional operating assets $ 7, 525, 000 The company had an overall ROI of 13% last year (considering all divisions). The new product line that headquarters wants Grenier's East Division to add would require an investment of $4,300,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales $ 12 , 900, 000 Variable expenses 60% of sales Fixed expenses $ 4, 515, 000 Required: 1. Compute the East Division's ROI for last year; also compute the ROI as it would appear if the new product line were added. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Mc Graw Hill O 163 MAR 31 cityChrome File Edit View History Bookmarks Profiles Tab Window Help O L . 2 Q g @ Fri Mar 31 4:19 PM D2L W11 Reporting for Contr X GNDS125 W23 Final Par X | GNDS 125 final paper - X Question 2 - A9 - Conne X Course Hero * *Homework Help - Q&A f X + - C ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com... dj Update Maps D2L smith learning solus Events - Glean Organizational be... Managerial Accou A9 i Saved Help Save & Exit Submit Required: 1. Compute the East Division's ROI for last year; also compute the ROI as it would appear if the new product line were added. (Do not 2 round intermediate calculations. Round your final answer to the nearest whole number.) Present New Line Total RO % % % 10 points eBook 2. If you were in Grenier's position, would you accept or reject the new product line? References Accept O Reject 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? O Adding the new line would decrease the company's overall ROI. O Adding the new line would increase the company's overall ROI. 4. Suppose that the company's minimum required rate of return on operating assets is 12% and that performance is evaluated using residual income. a. Compute East Division's residual income for last year; also compute the residual income as it would appear if the new product line were added. Mc Graw Hill O 163 MAR 31 cityChrome File Edit View History Bookmarks Profiles Tab Window Help O L . 7 Q g @ Fri Mar 31 4:20 PM D2L W11 Reporting for Contr X GNDS125 W23 Final Par X GNDS 125 final paper - X Question 2 - A9 - Conne X Course Hero * *Homework Help - Q&A f X + - C ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com... dj Update Maps D2L smith learning solus Events - Glean Organizational be... Managerial Accou A9 i Saved Help Save & Exit Submit O Reject 2 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? Adding the new line would decrease the company's overall ROI. 10 points O Adding the new line would increase the company's overall ROI. eBook 4. Suppose that the company's minimum required rate of return on operating assets is 12% and that performance is evaluated using References residual income a. Compute East Division's residual income for last year; also compute the residual income as it would appear if the new product line were added. Present New Line Total Residual income b. Under these circumstances, if you were in Grenier's position, would you accept or reject the new product line? Accept O Reject Mc Graw Hill O 163 MAR 31 city