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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

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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 R0] 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 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: Sales $21,700,000 Variable expenses 13,490,000 Contribution margin 8,210,000 Fixed expenses 6,474,000 Operating income $ 1,736,000 Divisional operating assets $ 4,340,000 The company had an overall ROI of 22% last year (considering all divisions ).The new product line that headquarters wants Grenier's East Division to add would require an investment of $2,325,000 .The cost and revenue characteristics of the new product line per year would be as follows Sales $ 9, 300, 000 Variable expenses 60 96 of sales Fixed expenses $ 3, 162, 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 .)

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