I know headquarters wants us to add that new product line, said Brian Stettler, manager of Sparks Products Central Division. But I want to see the numbers before I make a move. Our divisions return on investment (ROI) has led the company for three years, and I dont want any letdown.

Sparks Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the companys Central Division for last year are given below:

Sales	$	22,000,000
Variable expenses		14,000,000
Contribution margin		8,000,000
Fixed expenses		6,174,000
Net operating income	$	1,826,000
Divisional operating assets	$	5,500,000

The company had an overall ROI of 18% last year (considering all divisions). The companys Central Division has an opportunity to add a new product line that would require an investment of $3,430,000. The cost and revenue characteristics of the new product line per year would be as follows:

Sales	$ 10,290,000
Variable expenses	65% of sales
Fixed expenses	$ 2,870,910