I know headquarters wants us to add that new product line, said Fred Holloway, manager of KristiProducts West Division. But I want to see the numbers before I make a move. Our divisionsreturn on investment (ROI) has led the company for three years, and I dont want any letdown.Kristi Products is a decentralized wholesaler with four autonomous divisions. The divisions areevaluated on the basis of ROI, with year-end bonuses given to divisional managers who have thehighest ROI. Operating results for the companys West Division for the last year are given below:Sales............................ $21,000,000Variable expenses............. 13,400,000Contribution margin.......... 7,600,000Fixed expenses................ 5,920,000Net Operating Income........ $ 1,680,000Divisional Operating Assets. $ 5,250,000The company had an overall ROI of 18% last year (considering all divisions). The companys Westdivision has an opportunity to add a new product line that would require an investment of$3,000,000. The cost and revenue characteristics of the new product line per year would be asfollows:Sales........................... $9,000,000Variable expenses............ 65% of salesFixed expenses............... $2,520,000Required:1. (2 points) Compute the West Divisions ROI for last year; also compute the ROI as itwould appear if the company duplicated the same performance as last year and also addedthe new product line.2. (2 points) If you were in Fred Holloways position, would you accept or reject the newproduct line? Explain.3. (2 points) Why do you suppose headquarters is anxious for the West Division to add thenew product line?4. Suppose that the companys minimum required rate of return on operating assets is 15% andthat the performance is evaluated using residual income.a. (2 points) Compute the West Divisions residual income for the last year; also computethe residual income as it would appear if the company duplicated the same performanceas last year and also added the new product line.b. (2 points) Under these circumstances, if you were in Fred Holloways position wouldyou accept or reject the new product line? Explain