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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
"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 ROls. Operating results for the company's Office Products Division for the most recent year are given below: 21,810,000 Sales Variable expenses Contribution margin 13,741,200 8,068,800 Fixed expenses Net operating income Divisional operating 6,040,000 $2,028,800 $4,363,000 assets The company had an overall return on investment (ROI) of 18.00% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $2,350,000. The cost and revenue characteristics of the new product line per year would be Sales Variable expenses Fixed expenses $ 9,396,500 65% of sales $ 2,564,875 Required 1. Compute the Office Products Division's ROI for the most recent year, also compute the ROl as it would appear if the new product line is added. (Do not round intermediate calculations. Round your Turnover answers to 2 decimal places. Round your Margin and ROl percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) Present New Line Total Sales Net operating incom Operating assets Margin Turnover ROI
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