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i only need required 1-3 and 6A-6C int I know headquarters wants us to add that new product line, said Dell Havasi, manager of Bilings
i only need required 1-3 and 6A-6C
int "I know headquarters wants us to add that new product line," said Dell Havasi, manager of Bilings Company's Office Products Division "But I want to see the numbers before I make any move. Our division's return on investment (Ron 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 Division for this year are given below: year-end bonuses given to the divisional managers who have the highest Rois. Operating results for the company's Office Products Sale 5.21,400,000 Variable expenses 13,515,600 Contribution margin 7,080,600 Fixed expenses 5,980,000 Het operating income 1904.600 Divisional average operating area 65,350,000 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 $2,875,000. The cost and revenue characteristics of the new product line per year would be $200,000 Variable expenses 658 of sales Fixed expenses $ 2,541,400 ences ale Print References Required: 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 itselt 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 Havast's position, would you accept or reject the new producine? 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. TITTE Req 1 to 3 Req 4 Req5 Reg 6A to 6C Req 6D ok ht 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 product line. nces (Do no round Intermediate calculations. Round your answers to 2 decimal places.) 1. ROI for this year 2. ROI for the new product line by itself 3. ROI for next year % % % Red 1 to 3 Req 4 > 1 d. Using the residual income approach, if you were in Dell Havasi's position, would you accept or reje Complete this question by entering your answers in the tabs below. Req 1 to 3 Reg 4 Reqs Reg 6A to 60 Reg 60 Book Print 6. Suppose that the company's minimum required rate of return on operating assets is 13% and that perf 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 sam adds the new product line. erences 1. Residual income for this year 2. Residual income for the new product line by itself 3. Residual income for next year Prey 1 of 1 Next Step by Step Solution
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