"I know headquarters wants us to add that new product line, said Dell Havasi, manager of Billings Company's Orfice 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. Bilings 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 Rols. Operating results for the company's Office Products Division for this year are given below. Sales Variable expenses Contoribution margin Fixed expenses Net operating dncome olvisional average operating assets 5,22,600,60914,157,4008,442,6606,160,0095,2,282,6005,4,520,00074 The compary bad an overall return on investment (ROI) of 16 oog this year consifering all dwisions). Next year the Office Products Division has an opportunity to add a new product ine that would requing and andional (nvestment that would increase average operating assets by $2.450.000. The cost and revenue characteristics of the new product ine pet year would be: Required: 1 Compute the Orfice Products Division's ROI for this yeart 2 Compute the office Products Division's ROI for the new product ind by rseit. line: resicual incorne. a. Compute the office Procucts Division's res cup income for this yyor. b. Compute the Otfice Products Divesonts resicual insone fot the hew product line oy tseit. 4. If you were in Dell Havasi's position, would you accept or reject the new product line? 5. Why do you suppose headquarters is anxious for the Office Products Division to add the new product line? 6. Suppose that the company's minimum required rate of return on operating assets is 13% and that 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 line by itself. c. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product line? Complete this question by entering your answers in the tabs below. 1. Compute the Office Products Division's ROI for this year. 2. Compute the Office Products Division's ROI for the new product line by itself. 3. Compute the Office Products Division's ROI for next year assuming that it performs the same as this year and adds the new product line. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Complete this question by entering your answers in the tabs below. If you were in Dell Havasi's position, would you accept or reject the new product line? Complete this question by entering your answers in the tabs below, Why do you suppose headquarters is anxious for the office Products Division to add the new product line? 6. Suppose that the company's minimum requihed rate of return on operating assets is 13% and that 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 line by itself. c. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. Complete this question by entering your answers in the tabs below; Using the residual income approach, if you were in Dell Havasi's position, would you accept or reject the new product line