"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 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 ROIs. Operating results for the company's Office Products Division for the most recent year are given below:

Sales	$20,280,000
Variable expenses	12,865,340
Contribution margin	7,414,660
Fixed expenses	5,690,860
Net operating income	$1,723,800
Divisional operating assets	$5,200,000

The company had an overall return on investment (ROI) of 15% 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 $3,390,000. The cost and revenue characteristics of the new product line per year would be:

Sales	$10,170,000
Variable expenses	60% of sales
Fixed expenses	$3,274,740

Requirement 1:

Compute the Office Products Division's ROI for the most recent year; also compute the ROI as it would appear if the new product line is added.(Round interim calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

	ROI
Present	%
New Line	%
Total for company	%

Requirement 4:

Suppose that the company's minimum required rate of return on operating assets is 15% and that performance is evaluated using residual income.

(a)	Compute the Office Products Division's residual income for the most recent year; also compute the residual income as it would appear if the new product line is added. (Omit the "$" sign in your response.)

	Residual income
Present	$
New Line	$
Total for company	$