Faced with headquarters' desire to add a new product line, Stefanie Regierre, manager of Lufta Products East Division, felt that she had to see the numbers before she made a move. Her division's Rol has led the company for three years, and she doesn't want any letdown. Lufta 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 $29,400,000 Variable Expenses 14,480,000 Contribution Margin 14,920,000 Fixed Expenses 12.568.000 Operating Income $2.352.000 Divisional Operating Assets: $7,350,000 The company had an overall ROI of 15% last year (considering all divisions). The new product line that headquarters wants Regierre's East Division to add would require an Investment of $4,200,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales $12,600,000 Variable Expenses 70% of sales Fixed Expenses $3,024,000 Required: A) Compute the East Division's ROI for last year, the ROI for the new product line, and the total ROI as it would appear if the new product line were added. Show your work. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) B) If you were in Stephanie's position, would you accept or reject the new product line? Why? Danh B A 4 C) Why do you suppose headquarters is anxious for the East Division to add the new product line? Suppose that the company's minimum required rate of return on operating assets is 12% and that performance is evaluated using residual income. D) Compute East Division's residual income for last year, the residual income of the new product line, and the total residual income as it would appear if the new product line were added. Show your work. E) Under these circumstances, if you were in Stephanie's position, would you accept or reject the new product line? Why? Paragraph R Hill li