"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 I make a decision. 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 using ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company's Office Products Division for this year are given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 22,700,000 14,363,700 8,336,300 6,175,000 $ 2,161,300 $ 5,675,000 The company had an overall return on investment (ROI) of 16.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product requiring $3,938,000 of additional average operating assets. The annual cost and revenue estimates for the new product would be: Sales $ 9,800,000 Variable expenses Fixed expenses 65 % of sales $ 2,582,900 Required: 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 by itself. 3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming it performs the same as this year and adds the new product. 4. If you were in Dell Havasi's position, would you accept or reject the new product? 5. Why do you suppose headquarters is anxious for the Office Products Division to add the new product? 6. Suppose the company's minimum required rate of return on operating assets is 13% and 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 by itself. c. Compute the Office Products Division's residual income for next year assuming it performs the same as this year and adds the new product. d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product? Required 1 to Required 4 Required 5 3 Required 6A to 6C Required 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 by itself. 3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming it performs the same as this year and adds the new product. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. 1. Margin, turnover, and ROI for this year 2. Margin, turnover, and ROI for the new product line by itself 3. Margin, turnover, and ROI for next year Margin Turnover ROI % % % % % % Required 1 to 3 Required 4 > Show less Complete this question by entering your answers in the tabs below. Required 1 to 3 Required 4 Required 5 Required 6A to 6C Required 6D If you were in Dell Havasi's position, would you accept or reject the new product? Reject < Required 1 to 3 Required 5 > Complete this question by entering your answers in the tabs below. Required 1 to Required 4 Required 5 3 Required 6A to 6C Required 6D Why do you suppose headquarters is anxious for the Office Products Division to add the new product? Adding the new line would increase the company's overall ROI. < Required 4 Required 6A to 6C > Required 1 to Required 4 Required 5 3 Required 6A to 6C Required 6D 6. Suppose the company's minimum required rate of return on operating assets is 13% and 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 by itself. c. Compute the Office Products Division's residual income for next year assuming it performs the same as this year and adds the new product. 1. Residual income for this year 2. Residual income for the new product line by itself 3. Residual income for next year < Required 5 Required 6D > Show less Complete this question by entering your answers in the tabs below. Required 1 to Required 4 Required 5 3 Required 6A to 6C Required 6D Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product? Accept < Required 6A to 6C Required 6D