I know headquarters wants us to add that new product line, said Dell Havasi, manager of Billings Companys Office Products Division. But I want to see the numbers before I make any move. Our divisions return on investment (ROI) has led the company for three years, and I dont 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 ROIs. Operating results for the companys Office Products Division for the most recent year are given below:

Sales $ 22,045,000

Variable expenses 13,882,000

Contribution margin 8,163,000

Fixed expenses 6,070,000

Net operating income $ 2,093,000

Divisional operating assets $ 5,500,000

The company had an overall return on investment (ROI) of 16.00% 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 $2,501,500. The cost and revenue characteristics of the new product line per year would be:

Sales$ 9,500,000

Variable expenses65% of sales

Fixed expenses$ 2,574,100

Compute the Office Products Divisions ROI for the most recent year; also compute the ROI as it would appear if the new product line is added.

present new line total

sales

net operaqting income

operating assets

margin

turnover

ROI

Compute the Office Products Divisions residual income for the most recent year; also compute the residual income as it would appear if the new product line is added. present new line total operating asstes minimum required return percent percent percent minimum ner operating income actual net operating income minumum net operating income residual income