"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 retum on investment (ROI) has led the company for three years. and I don't want any letdown." Bilings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROl, 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: The company had an overall return on investment (RO) of 16.00% this year (considering all divisions) Next year the Oftice Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $2,501,000. The cost andirevenue characteristics of the new product line per year would be: 1. Compute the Office Products Division's margin, turnover, and ROI for this year Required: 2. Compute the Office Products Division's margin, turnover, and ROI for the new product line by itself 3. Compute the Office Products Division's margin, tumover, and ROI for next year assuming that it performs the same as this year and adds the now 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 Otfice 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 hequarect: 1 Compute the Orfice Products Division's margin, turnover, and ROI for this year. 2. Compute the Oflice Products Division's margin, turnover, and ROl for the now product line by itself. 3. Compute the Office. Products Division's margin. turnover, and ROI for next year assuming that it performs the same as this year and adds the new product line: 4. If you were in Deel Havasi's position, would you sccept or reject the new product line? 4. Why do you suppose headquartors is arxoious for the Office Products Division to adid the now 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 incorme. a. Compute the Otrice Products. Dlvision'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 OAtice Products Division's residual income for next year assuming that it perfocms the same as this year and adds the new product line. dew using the residual inceme approach, if you were in Dell Havasils pesition, would you accept or reject the new product line? Complete this question by entering your answers in the tabs below. 1. Compute the Otfice Products Division's margin, tumover, and ROI for this year, 1. Compute the oifice Products Drvision's margin, tumover, and Rol for this year, year and adds the new product line. (Do not round internediate calculations, Round your answers, to 2 decimal placos.)
