"I know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Office Products Division.

"But I wont to see the numbers before I make o decision. Our division's return on investment $($ROI$)$ hos led the company for three

years, and I don"t want any letdown."

Billings Compony is a decentralized wholesoler with five outonomous divisions. The divisions are evaluated using 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 ore given below:

The company had an overall return on investment $($ROI$)$ of $19\mathrm{.}00\%$ this year $($considering all divisions$).$ Next year the Office Products

Division has on opportunity to add a new product requiring $$2,600,000$ of additional average operating assets. The annual cost and

revenue estimates for the new product would be:

Required:

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.

Compute the Office Products Division's margin, turnover, and ROl for next year ossuming it performs the same as this year and odds

the new product.

If you were in Dell Havssi's position, would you sccept or reject the new product?

Why do you suppose hesdquarters is anxious for the Office Products Division to add the new product?

Suppose the compony's minimum required rate of return on operating assets is $16\%$ 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 sssuming it performs the some as this year and odds the

new product.

d$.$ Using the residual income approach, if you were in Dell Havssi's position, would you accept or reject the new product?

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Compute the Office Products Division's margin, tumover, and ROI for this year.

Compute the Office Products Division's margin, turnover, and ROI for the new product by itself.

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.