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Faced with headquarters desire to add a new product line. Stefan Grenier, mariager of Bilti Products East Division, felt that he had to see the
Faced with headquarters desire to add a new product line. Stefan Grenier, mariager 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 Variable expenses Contribution margin Fixed expenses Operating income $ Divisional operating assets $ The company had an overall ROI of last year considering all divisions The new product line that headquarters wants Grenier's Fast Division to add would require an investment of $ The cost and revenue characteristics of the new product line per year would be as follows: Sales Variable expenses of sales Fixed expenses $ Required: 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. Round your final answer to the nearest whole number. New Line Total ROI Present If you were in Grenier's position, would you accept on reject the new product line? Accept Reject Why do you suppose headquarters is anxious for the East Division to add the new product line? Adding the new line would decrease the company's overall ROL Adding the new line would increase the company's overa RO Suppose that the company's minimum required rate of return on operating assets is and that performance is evaluated using residual income a Compute East Division's residual income for last year, also compute the residual income as it would appear if the new product line were added Present Residual income Seve New Line Total b: Linder these circumstances, if you were in Grenix s position, would you accept or reject the new product line? Accept Reject
Faced with headquarters desire to add a new product line. Stefan Grenier, mariager 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
Variable expenses
Contribution margin
Fixed expenses
Operating income
$
Divisional operating assets
$
The company had an overall ROI of last year considering all divisions The new product line that headquarters wants Grenier's Fast Division to add would require an investment of $ The cost and revenue characteristics of the new product line per year would be as follows:
Sales
Variable expenses
of sales
Fixed expenses
$
Required:
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. Round your final answer to the nearest whole number.
New Line
Total
ROI
Present
If you were in Grenier's position, would you accept on reject the new product line?
Accept
Reject
Why do you suppose headquarters is anxious for the East Division to add the new product line?
Adding the new line would decrease the company's overall ROL
Adding the new line would increase the company's overa RO
Suppose that the company's minimum required rate of return on operating assets is and that performance is evaluated using residual income
a Compute East Division's residual income for last year, also compute the residual income as it would appear if the new product line were added
Present
Residual income
Seve
New Line
Total
b: Linder these circumstances, if you were in Grenix s position, would you accept or reject the new product line?
Accept
Reject
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