Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I know headquarters wants us to add that new product line, said Dell Havasi, manager of Bilings Company's Nice Products Division. But want to see

image text in transcribed
image text in transcribed
image text in transcribed
"I know headquarters wants us to add that new product line," said Dell Havasi, manager of Bilings Company's Nice Products Division. But want to see the numbers before I make any move. Our division's return on investment (ROI) has led the company for three years, and I don't want any letdown Bilings Company is a decentralized wholesaler with five autonomous divisions. The disions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest Rols. Operating results for the company's Office Products Division for this year are given below. Sales Variable expenses Contribution margin Fixed expenses Set operating income Divisional average operating assets $ 22,500,000 14, 105,500 3,399,500 6.245.000 $2,259, 300 54,697,500 The company had an overall return on investment (RON of 1700% this year (considering all divisions) Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by 53 251.000 The cost and revenue charactenstics of the new product line per year would be Vatable expenses 59,750,000 65t of sales $2.595.300 Reg 1 to 3 Reg 4 Reg 5 Reg 6A to 6C Req 6D 1. Compute the Office Products Division's margin, turnover, and ROI for this year. 2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself. 3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming that it performs the same as this year and adds the new product line. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Show less % 1. ROI for this year 2. ROI for the new product line by itself 3. ROI for next year la se 6. Suppose that the company's minimum required rate of return on operating assets is 14% and that performance is evaluated using residual income. a. Compute the Office Products Division's residual income for this year. b. Compute the Office Products Division's residual income for the new product line by itself. C. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. Show less 1. Residual income for this year 2. Residual income for the new product line by itself 3. Residual income for next year

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Audit Guide For Beginners Understanding Fiduciary Responsibilities

Authors: Oren Rohleder

1st Edition

B0B1M56DMY, 979-8829314019

More Books

Students also viewed these Accounting questions

Question

why might canada be an easy target for money launderers?

Answered: 1 week ago

Question

What is management growth? What are its factors

Answered: 1 week ago