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

"But I want to see the numbers before I moke any move. Our division's return on investment $($ROl$)$ has led the company for three years,

and I don't want any letdown."

Billings Compony is a decentrolized wholessler with five sutonomous divisions. The divisions are evslusted on the bosis of ROI, with

year$-$end bonuses given to the divisional managers who hove the highest ROls. Operating results for the company's Office Products

Division for this year ore given below:

The compony had an overall return on investment $($ROI$)$ of $18\mathrm{.}00\%$ this year $($considering all divisions$).$ Next year the Office Products

Division has on opportunity to add a new product line that would require an additional investment that would increase average

operating sssets by $$2,350,000.$ The cost and revenue charscteristics of the new product line per year would be:

Sales $$9,396,500$year

Variable expenses $65\%$ of sales

Fixed expenses $$2,564,875$

Required:

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

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

Compute the Oassumingyearyearffice Products Division's margin, turnover, and ROl for next year assuming that it performs the same as this year and

odds the new product line.

If you were in Dell Hovosi's position, would you accept or reject the new product line?

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

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

residual income.

o$.$ Compute the Office Products Division's residusl income for this year.

b$.$ Compute the Office Products Division's residusl income for the new product line by itself.

c$.$ Compute the Office Products Division's residual income for next year sssuming that it performs the some ss this year and sdds the

new product line.

d$.$ Using the residual income opprosch, 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.

Compute the Orrice Products Division's margin, turnover, and ROI for this year.

Compute the Orfice Products Division's margin, turnover, and ROI for the new product line by itselr.

Compute the Orfice Products Division's margin, tumover, and 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.$)$