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 Rol has led the company for three years, and he doesn't want any letdown Bit Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of Rol, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last year are given below: $30,100,000 14,570,000 sales Variable expenses Contribution margin Tixed expenses Operating income Divisional operating anseta 15,530,000 13, 122.000 $ 2,408,000 37,525,000 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 Variable expenses Tixed expenses $22,900,000 601 of sales $ 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.) Present New Line Total ROI 2. If you were in Grenier's position, would you accept or reject the new product line? Accept Reject 3. Why do you suppose headquarters is arvious for the East Division to add the new product ine? Adding the new line would decrease the company's overall ROL Adding the new line would increase the company's overall ROL 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 New Line Total