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-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 $26, 600,000 Variable expenses 14, 120,000 Contribution margin 12, 480,000 Fixed expenses 10, 086,000 Operating income $ 2,394,000 Divisional operating assets $ 6, 650,000