I know headquarters wants us to add that new product line, said Dell Havasi, manager of...
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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 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 this year are given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 10,000,000 6,000,000 4,000,000 3,200,000 $ 800,000 $ 4,000,000 The company had an overall return on investment (ROI) of 15% this year (considering all divisions). Next year the Office Division has an opportunity to add a new product line that would require an additional investment that would increase ave operating assets by $1,000,000. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses Required $ 2,000,000 60% of sales $ 640,000 "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 this year are given below: Sales Variable expenses Contribution margin Fixed expenses Net operating income Divisional average operating assets $ 10,000,000 6,000,000 4,000,000 3,200,000 $ 800,000 $ 4,000,000 The company had an overall return on investment (ROI) of 15% this year (considering all divisions). Next year the Office Division has an opportunity to add a new product line that would require an additional investment that would increase ave operating assets by $1,000,000. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Fixed expenses Required $ 2,000,000 60% of sales $ 640,000
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