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Faced with headquarters desire to add a new product line, Stefan Grenier, manager of Bill Products' East Division, felt that he had to see the
Faced with headquarters desire to add a new product line, Stefan Grenier, manager of Bill 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 Bilti Products is a decentralized wholesale 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 Rol Operating results for the company's East Division for last year are given below Sales Variable expenses $29.100.000 13,700,000 Contribution margin Fixed expenses 10,040,000 0.376.000 Operating Income 3.1.100.000 $5.950,000 Disional operating assets The company had an overall ROI of 16% last year (considering all divisions) The new product line that headquarters wants Grenier's East Division to add would require an investment of $3,400,000. The cost and revenue characteristics of the new product ane peryan would be as follows Sales ble penet FEES 11.200,00 S of sales 52,950,000 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) New Line Total Present 70 ROI 15%
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