Division A of Muscat Company had the following results for the year just ended:

Sales: $480,000

Variable costs: $300,000

Fixed costs: $150,000

Total operational assets: $200,000

Division A is considering a new product line that would involve the following:

Sales: $72,000

Variable costs: $40,000

Fixed costs: $25,000

Total operational assets: $60,000

Muscat Company has a company-wide ROI of 10% and pays bonuses based on divisional ROI.

Required:

a. Determine the effect on Division As ROI if it introduces the new product line.

b. Would Division As managers be encouraged to introduce the new product line?

c. Would the top managers of Muscat Company want to introduce the new product line? Explain why