"I know headquarters wants us to add that new product line, said Dell Hovas, 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 Rolhas led the company for three years, and I don't want any tetdown." Billings Company is a decentralized wholesale 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 unset $ 22,045,000 13,882.000 8.163,000 6,070.000 52,093, 000 $ 5,500,000 The company had an overall return on investment (ROI) of 16.00% this year (considering all divisions). Next year the office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $2,501,500. The cost and revenue characteristics of the new product line per year would be Sales Variable expenses Fixed expenses $9,500,000 658 of sales $2.574,100 Required: 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 4. If you were in Dey 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 Havasil's position, would you accept or reject the new product line? Complete this question by entering your answers in the tabs below. Reg 1 to 3 Reg 4 Req5 Req 6A to 6C Reg 60 1. Compute the Office Products Division's Rol 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. Sales Variable expenses Fixed expenses $9,500,000 651 of sales $2,574,100 Required: 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 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 tine? Complete this question Ny entering your answers in the tabs below. Req 1 to 3 Reg 4 Reg 5 Reg 6A to 6C Reg 60 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.) Show less 1. ROI for this year 2. ROI for the new product line by itself 3. ROI for next year % Reqttaa Req4 > The company had an overall return on investment (ROI) of 16.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $2,501,500. The cost and revenue characteristics of the new product line per year would be: Sales Variable expenses Pined expenses $9,500,000 558 of sales 52,374,100 Required: 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 Rol for next year assuming that it performs the same as this year and adds the new product line 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. Req 1 to 3 Reg 4 Reg 5 Req 6A to 6C Req 6D 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 fear assuming that it performs the same as this year and adds the new product line. Show less 1. Residual income for this year 2 Residual income for the new product line by itself 3. Residual income for next year