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I know headquarters wants us to add that new product line said Dell Havasi, manager of Billings Company's Office Products Division. But I want to
"I know headquarters wants us to add that new product line said Dell Havasi, manager of Billings Company's Office Products Division. "But I want to see the numbers before l make any move. Our division's return on investment (ROI) has led the company for three years, and I don't want any letdown." Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions 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 forthe most recent year are given below: 21,750,000 Sales 13,731,600 Variable expenses 8,018,400 Contribution margin 6,025,000 Fixed expenses 1,993,400 Net operating income Divisional operating assets 4,338,800 The company had an overall return on investment (ROl) of 18.00% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $2,126,350. The cost and revenue characteristics of the new product line per year would be: 9,350,000 Sales Variable expenses 65% of sales 2,560,500 Fixed expenses
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