Faced with headquarters desire to add a new product line, Stefan Grenietmanager of Bas 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 Bio 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 Dision for last year are given below 2.500.00 Sales Variable expenses Contribution martin FDE operating Inco Divisional ratings 120.00 30. 32,34 5.5.650.000 The company had an overall ROI of 16% last year consideng all divisions) The new product ane that headquarters wants Greniers East Division to add would require an investment of $3,800,000. The cost and revenue characteristics of the new product line per year would be as follows Sales Variable expenses Fixed 5 13.400.000 655 of sales 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. Round your final answer to the nearest whole number.) Present New Line Total ROL 2. If you were in Grenier's position, would you accept or reject the new product line? Accept Reject 3. 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 ROI O Adding the new line would increase the company's overall ROI 4. Suppose that the company's minimum requtred rate of return on operating assets 15 13% 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 une AHHH 4. Suppose that the company's minimum required rate of return on operating assets is 13% and that performance is evaluated using residual income a. Compute East Division's residual income for last year, also compute the residual income as i would appear it the new product line were added Present New Line Total Residual income b. Under these circumstances, if you were in Grenler'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, manager of Bit 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 Bit Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of RI. 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 Contribution margin Fixed expenses Operating Income Divisional operating assets $26,600,000 14,120,000 12,430,000 10.086,000 $ 2,394,000 $ 6,650,000 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 $3,800,000. The cost and revenue characteristics of the new product line per ye would be as follows Sales Variable expenses Fixed expenses $ 11,400,000 65% of sales 53,306,000 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 no round intermediate calculations. Round your final answer to the nearest whole number.) Present New Line Total ROL 96 9 2. If you were in Grenler's position, would you accept or reject the new product line? OAccept O Reject 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? O Adding the new line would decrease the company's overall ROI Adding the new line would increase the company's overall ROI Faced with headquarters desire to add a new product line, Stefon Grenler, manager of Bit 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 eveluated on the basis of Rl, 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 Contribution margin Fixed expenses Operating income Divisional operating assets $26,600,000 14,120,000 12,480,000 10,086,000 52,394,000 $ 6,650,000 The company had an overall ROI of 16% last year (considering all divisions). The new product line that headquarters wants Grenler's East Division to add would require an investment of $3,800,000. The cost and revenue characteristics of the new product line per year would be as follows: Sales Variable expenses Fixed expenses $ 11,400,000 65% of sales $ 3,386,000