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 divisions ROI has led the company for three years, and he doesnt 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 companys East Division for last year are given below:

Sales Variable expenses $21,700,000 13,490,000 Contribution margin Fixed expenses 8,210,000 6,474,000 $ 1,736,000 Operating income 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% of sales Fixed expenses $3,162,000 Required: 1. Compute the East Division's ROI for last year; also compute the Rol 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? O Accept O Reject